Markets regulator SEBI has imposed a five-year ban on industrialist Anil Ambani and 24 others, including key former officials of Reliance Home Finance Ltd (RHFL), due to their involvement in a large-scale fund diversion scheme. The action comes after an extensive investigation into fraudulent activities that led to significant financial losses.
Five-Year Ban and Heavy Fines
SEBI has barred Anil Ambani from participating in the securities market, including serving as a director or Key Managerial Personnel (KMP) in any listed company or registered intermediary, for a period of five years. In addition, Ambani has been fined Rs 25 crore. Reliance Home Finance Ltd has also been banned from the securities market for six months and fined Rs 6 lakh.
Fraudulent Scheme and Governance Failures
The investigation revealed that Ambani, with the assistance of RHFL’s top executives, orchestrated a fraudulent scheme to siphon funds from RHFL by disguising them as loans to entities connected to him. Despite directives from RHFL’s Board of Directors to halt such practices, the management ignored these orders, reflecting a severe failure of governance.
SEBI’s report indicates that the funds were funneled through companies with negligible financial standing, and many of these borrowers were closely linked to the promoters of RHFL. The fraudulent scheme contributed to RHFL’s inability to meet its debt obligations, leading to its resolution under the RBI Framework and substantial losses for public shareholders.
Impact on Shareholders and Financial Penalties
The impact on RHFL’s shareholders has been severe. The company’s share price dropped dramatically from Rs 59.60 in March 2018 to Rs 0.75 in March 2020 as the fraud was uncovered. Currently, over 900,000 shareholders are facing significant losses.
SEBI has also imposed fines on the 24 restrained entities involved. Key figures such as Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah, former officials at RHFL, have been fined Rs 27 crore, Rs 26 crore, and Rs 21 crore respectively. Other entities involved, including Reliance Unicorn Enterprises and Reliance Big Entertainment Private Ltd, face fines of Rs 25 crore each for their roles in the fund diversion scheme.
Ongoing Investigation and Interim Measures
In February 2022, SEBI had issued an interim order prohibiting Anil Ambani, Amit Bapna, Ravindra Sudhalkar, and Pinkesh R Shah from the securities market until further notice. The final order confirms and extends these restrictions, reflecting SEBI’s ongoing commitment to addressing financial misconduct and protecting investors.
