Sebi bans Anil Ambani, 24 other entities from securities market for 5 years for ‘siphoning off funds’

Sebi said its findings have established the "existence of a fraudulent scheme, orchestrated by Noticee No. 2 (Anil Ambani) to siphon off funds from the public listed company (RHFL)." (Express File Photo by Sankhadeep Banerjee)

The Securities and Exchange Board of India (Sebi) has barred businessman Anil Ambani and 24 other entities, including former officials of Reliance Home Finance Ltd (RHFL), from the securities market for five years for diversion of funds from the company, news agency PTI reported.

The markets regulator has also imposed a penalty of Rs 25 crore on Ambani. Sebi has restrained Ambani from being associated with the securities market, including as a director or Key Managerial Personnel (KMP) in any listed company, or any intermediary registered with the market regulator, for a period of 5 years.

Sebi has also banned RHFL from the securities market for six months and slapped a fine of Rs 6 lakh on it.

The 24 restrained entities include former key officials of RHFL Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah. Sebi has imposed a fine of Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar and Rs 21 crore on Shah.

Other 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 imposed a penalty of Rs 25 crore each.

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What does the Sebi order say?

In a 222-page order, Sebi said that Anil Ambani, with the help of RHFL’s key managerial personnel, has “orchestrated a fraudulent scheme to siphon-off funds” from the company “by disguising them as loans to entities linked to him.”

Sebi said that despite RHFL’s Board of Directors issuing strong directives to stop such lending practices, the company’s management “ignored these orders”.

“This suggests a significant failure of governance, driven by certain key managerial personnel under the influence of Anil Ambani. Given these circumstances, the company RHFL itself should not be held equally responsible as the individuals involved in the fraud,” the regulator stated.

The order also noted that the remaining entities “played the role of being either recipients of illegally obtained loans or conduits to enable illegal diversion of monies from RHFL.”

The order also noted the “cavalier approach” of RHFL’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.

According to Sebi, the sequence of events suggest a “sinister objective” behind these said loans. “The situation becomes even more suspicious when considering that many of these borrowers were closely linked to the promoters of RHFL,” the regulator said.

With the borrowers failing to repay their loans, RHFL defaulted on its debt obligations, which left public shareholders in a difficult position. Over 9 lakh shareholders, who remain invested in RHFL, continue to face significant losses.

In 2022, Sebi had restrained RHFL, Ambani, Bapna, Sudhalkar and Shah from the securities market till further orders in the case. In February 2020, Ambani had declared to a UK court that he was “bankrupt” and his net worth was “zero.”

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Cecily Watkins

Sebi bans Anil Ambani, 24 other entities from securities market for 5 years for ‘siphoning off funds’

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