SEBI has imposed a hefty fine of Rs 25 crore on Anil Ambani and barred him from participating in the securities market for five years.
The Securities and Exchange Board of India (SEBI) has taken stringent action against Anil Ambani and Reliance Home Finance Ltd. (RHFL) for disbursing loans to related parties without proper scrutiny.
SEBI has imposed a hefty fine of Rs 25 crore on Ambani and barred him from participating in the securities market for five years. In addition, penalties were levied against RHFL and several key executives involved.
The regulatory action stems from an investigation into alleged violations of SEBI’s regulations. SEBI’s order, made public on Thursday evening, accused Ambani of being the “mastermind behind the fraudulent scheme” through which RHFL, during the 2018-19 period, provided loans categorized as working capital loans without due diligence, to parties related to the Reliance ADA Group.
The total amount of loans under scrutiny reached Rs 8,470 crore. The SEBI order highlighted that the disbursements, structured as General Purpose Working Capital (GPC) loans, were directly or indirectly transferred to entities associated with the Reliance ADA Group.
The investigation revealed the hasty and irregular manner in which these loans were approved and disbursed. Evidence showed that senior officials actively pushed for the disbursement of these loans, displayed little interest in recovering the dues, and that Ambani personally approved these transactions.
Further, SEBI’s findings indicated that 62 loans, amounting to Rs 5,552.67 crore, were approved on the same day the loan applications were submitted, while 27 loans totaling Rs 1,940.6 crore were disbursed on the same day as the application.
Credit Approval Memos (CAM) for loans totaling Rs 5,850.19 crore showed significant “deviations from due process,” such as waived field investigations, lack of security for loans, and incomplete loan documentation.
Also Read:- Local Pune Eatery Wins 13-Year Legal Battle Against Burger King Over Trademark Rights
The investigation also noted that, despite the presence of senior officials tasked with overseeing loans above Rs 5 crore and a credit committee, critical issues like negative net worth and weak financials of borrower entities were ignored, and loans were sanctioned despite these red flags.
SEBI’s investigation was further supported by reports from Price Waterhouse & Co. (the statutory auditor for RHFL) and Grant Thornton (the forensic auditor appointed by Bank of Baroda). Price Waterhouse & Co., in a letter dated June 11, 2019, informed RHFL’s Board of Directors that it was withdrawing from its audit due to ethical concerns, including lack of adequate responses to audit queries and legal threats from the company. RHFL, however, contested these reasons in a subsequent communication to stock exchanges.
The Grant Thornton report echoed SEBI’s findings, identifying similar discrepancies and irregularities, particularly regarding related parties. The report noted that eight borrower entities, previously classified as related parties to Reliance Power Ltd. and Reliance Infrastructure Ltd., were reclassified as non-related parties just before loans were disbursed to them, with a total of Rs 1,323.43 crore distributed to these entities.
As a result of these findings, SEBI imposed severe penalties on 28 individuals and entities associated with RHFL, including a six-month ban on RHFL from accessing the securities market. The five-year ban extends to Anil Ambani and 26 others, preventing them from holding positions as directors or key managerial personnel in any listed or SEBI-registered companies.
Also Read:- Who is Sanjay Roy, The Accused in RG Kar Medical College Doctor Rape-Murder Case
Additionally, SEBI imposed fines of Rs 5 lakh on RHFL, Rs 25 crore on Anil Ambani, Rs 27 crore on RHFL CFO Amit Bapna, and Rs 26 crore on RHFL CEO Ravindra Sudhalkar, along with Rs 25 crore fines on other companies implicated in the violations.