Anil Ambani fined Rs 25 crore, barred from securities market for 5 years; 24 others also barred by SEBI

Markets regulator Sebi has slapped a five-year ban on ADAG chairman Anil Ambani and 24 associated entities, blocking them from the securities market. The group has been hit with a hefty ₹624 crore penalty for diverting funds from Reliance Home Finance. Ambani, along with former RHFL top brass Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, has also been barred from any involvement with listed entities for five years.

In addition, 21 entities face fines of ₹25 crore each for their alleged roles in the case, while RHFL's brass -- Bapna, Sudhalkar, and Shah has also been fined ₹27 crore, ₹26 crore, and ₹21 crore, respectively.

Also, the regulator barred Reliance Home Finance from the securities market for six months and slapped a fine of Rs 6 lakh on it. 

In its 222-page final order, SEBI found that Anil Ambani, with the help of Reliance Home Finance Limited’s (RHFL) key managerial personnel, had orchestrated a fraudulent scheme to siphon-off funds from RHFL by disguising them as loans to entities linked to him. 

Although the Board of Directors of RHFL had issued strong directives to stop such lending practices and reviewed corporate loans regularly, the company's management ignored these orders. 

SEBI said its findings have established the “existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) and administered by the KMPs of RHFL, to siphon off funds from the public listed company (RHFL) by structuring them as ‘loans’ to credit unworthy conduit borrowers, and in turn, to onward borrowers, all of whom have been found to be ‘promoter linked entities’ i.e. entities associated/ linked with Noticee 2 (Anil Ambani)”. 

Anil Ambani used his position as ‘chairperson of the ADA group’ and his significant indirect shareholding in the holding company of RHFL to orchestrate the fraud.  

The market regulator, in its order, noted the cavalier approach of the company’s management and promoter in approving loans worth hundreds of crores to companies that had little to no assets, cash flow, net worth, or revenue.  

This suggests a sinister objective behind the ‘loans’, it said. The situation becomes even more suspicious when considering that many of these borrowers were closely linked to the promoters of RHFL. 

Eventually, most of these borrowers failed to repay their loans, causing RHFL to default on its debt obligations leading to the company's resolution under the RBI Framework and left its shareholders in the lurch, the report added. Even now, over 9 lakh shareholders remain invested in RHFL, facing significant losses.

The 24 restrained entities include former key officials of Reliance Home Finance Ltd (RHFL) -- Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah. The regulator levied a fine of Rs 25 crore on Ambani, Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar and Rs 21 crore on Shah.

The remaining entities including Reliance Unicorn Enterprises, Reliance Exchange next Lt, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd and Reliance Big Entertainment Private Ltd have been fined Rs 25 crore each.

These fines have been levied on them for either receiving the illegally obtained loans or acted as intermediaries to facilitate the illegal diversion of funds from RHFL.

In February 2022, SEBI had passed an interim order and restrained Reliance Home Finance Ltd, industrialist Anil Ambani and three other individuals (Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah) from the securities market till further orders for allegedly siphoning off funds from the company.