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Synopsis

Securities and Exchange Board of India has restrained Anil Ambani from being associated with the securities market including as a director or Key Managerial Personnel in any listed company, holding/ associate company of any listed company, or in any intermediary registered with SEBI, for a period of 5 years.

Additionally, it has also restrained 23 companies from accessing the securities market and prohibited them from buying, selling or otherwise dealing in securities, directly or indirectly, for a period of 5 years.

A penalty of INR 25 crores has also been imposed on each of them, which is to be paid within a period of forty-five (45) days.

The order was passed yesterday by Ananth Narayan G, a whole-time member of SEBI.

Ambani has been found guilty for a fraudulent scheme, orchestrated by him and administered by the Key Managerial Persons (KMPs) of Reliance Home Finance Limited (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 Ambani.

SEBI's order states that certain KMPs under the instruction of Ambani, who was not holding any position in governance of RHFL, systematically stripped the company’s assets/ funds in blatant defiance of the RHFL Board’s direction.

"The facts of this case is particularly disturbing since it reveals complete breakdown of governance in a large listed company apparently orchestrated by and/ or at the behest of the promoter aided by the indulgent KMPs of the company. The Company which was subject to the regulatory framework laid down by NHB and subsequently RBI (as an HFC) as well as by SEBI (as a listed company) did not seem to care about the need to maintain high standards of governance. This is also a peculiar case where the company’s management has brazenly defied the diktat of its own Board that had raised concerns about GPCL lending and asked the company management to ensure compliance with the law....", the order adds.

It has further been held that 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 thereby not just adversely affecting RHFL’s stakeholders but also the confidence in the integrity of governance structures in regulated financial sector entities. 

"When juxtaposed against a well regulated financial system where extending even small ticket loans is subject to multiple checks and restrictions, the cavalier approach by the company management and the promoter in approving loans amounting to hundreds of crores to companies many of which had negligible assets, cash flows, net worth, or revenues, suggests a sinister objective behind the ‘loans’. This sinister objective becomes all the more clear when the relationship of the borrowers with the promoters of RHFL are taken into account...", SEBI has held.