New Delhi, Aug 23 (Agency) Market regulator SEBI on Friday banned industrialist Anil Ambani, 24 other entities and former officials of Reliance Housing Finance Limited (RHFL) from the security market for a period of 5 years for diversion of funds from the company. In its “Final Order in the matter of Reliance Home Finance Limited”, the SEBI said the findings of this Order have established the existence of a “fraudulent scheme”, orchestrated by Notice No. 2 (Anil D. Ambani) and administered by the Key Managerial Persons (KMPs) of 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 Notice 2 (Anil Ambani).
The regulator also imposed a financial penalty of Rs 25 crore on Ambani to be paid within 45 days of this order. Ambani and other notices are restrained from accessing the securities market and prohibited from buying, selling or otherwise dealing insecurities, directly or indirectly, for a period of 5 years, from the date of coming into force of this order, it added. Ambani is also restrained 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, from the date of coming into force of this direction.
In its 222-page final order, Sebi said although the Board of Directors of RHFL had issued strong directives to stop such lending practices and reviewed corporate loans regularly, the company’s management ignored these orders suggesting a significant failure of governance, driven by certain key managerial personnel. From the finding its was clear from the shareholding pattern that Reliance Capital Ltd (RCL) was the major promoter of RHFL during the relevant period holding 47.91% of its shares. Mr. Anil D. Ambani (Noticee no. 2) was also the Promoter and Non-executive and Non-Independent Director of RCL, during FY 2018-19. Further, in terms of the Related Party disclosure made in the Annual Report of RCL, Noticee No. 2 had been disclosed as an Individual Promoter being ‘the person having significant influence during the year’. Furthermore, Noticee no.2 was also found to be a significant beneficial owner of other companies.
The 24 restrained entities include former key officials of Reliance Home Finance Ltd (RHFL) — Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah — and Sebi has imposed fine on them for their role in the case. Also, the regulator levied a fine of Rs 25 crore on Ambani, Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar and Rs 21 crore on Shah, the Order said. The Order also stated that it is well established through various decisions of the Hon’ble Supreme Court, Hon’ble High Courts and Hon’ble SAT that the scope of the power under Section 11B of the SEBI Act is wide, under which directions can be passed to order refunds/ bring back monies/ disgorge illegal gains made by any person in violation of securities law. “SEBI shall determine the quantum of illegal gains/ benefit made by way of the fraudulent scheme as established in this Order and action may be initiated in accordance with law,” the Order said.