The Securities and Exchange Board of India (SEBI) has fined Rs. 624 crore on Reliance Group Anil Ambani Chairman and 24 others for allegedly embezzling money from Reliance Home Finance Limited (RHFL).
The market regulator has also banned Anil Ambani from accessing the securities market. Additionally, for a period of five years, individual entities are not permitted to hold significant roles in any listed company or its affiliates. Ambani is subject to a Rs 25 crore penalty.
The group led by Anil Ambani declined to comment on the SEBI order. The market regulator noted that Ambani created a fictitious plan to siphon off RHFL funds by lending money to organizations associated with the promoters, who served as intermediaries to transfer the cash.
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This concerns general purpose working capital loans (GPCLs) that RHFL disbursed in the years 2018 and 2019. At RHFL, the regulator discovered a number of irregularities, infractions, and disclosure errors. From Rs 3,742 crore in 2017–18 to Rs 8,670 crore in 2018–19, RHFL’s loan portfolio had grown dramatically.
As per the SEBI directive, RHFL was yet to receive a total of Rs 6,931 crore as unpaid payments. Several listed equities in the ADAG group reached their five percent lower trading limitations after SEBI’s tighter rules.
The order comes after SEBI’s interim order-cum-show-cause notice from February 2022. Ambani stated that he did not hold any position at RHFL and was not involved in the day-to-day operation of the company during the hearing that SEBI provided. He further argued that the Reserve Bank of India (RBI) and the National Housing Bank (NHB) governed RHFL and that SEBI had no jurisdiction over any issues relating to the company’s operations.
Ananth Narayan, a full-time SEBI member, stated in the order that “the facts of this case are particularly disturbing since it reveals a complete breakdown of governance in a large listed company that appears to have been orchestrated by and/or at the behest of the promoter, aided by the indulgent key managerial personnel (KMPs) of the company.”
He pointed out that, following Ambani’s orders, several directors and management personnel “systematically stripped the company’s assets/funds” by refusing to follow the board’s directives banning lending to corporations. These errors were verified by reports from independent auditors PwC and Grant Thornton, in addition to investigations led by SEBI.
Following a previous ruling from the National Financial Reporting Authority (NFRA) in April, to which the regulator had referred the case, comes SEBI’s most recent directive. The NFRA had observed that the auditors had neglected to thoroughly review RHFL’s loan disbursements to financially troubled companies, with monies being transferred to other group entities without proper business justification.
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