SEBI Bans Anil Ambani, RHFL, 3 Others From Securities Market

SEBI (Securities and Exchange Board of India) has banned Anil Ambani, three of his associates, and RHFL (Reliance Home Finance Limited) from the securities market for three months. The ban was imposed on Ambani, Pinkesh Shah, Ravindra Sudhalkar, and Amit Bapna for allegedly being involved in siphoning off funds from RHFL. 

On 11th February 2022, SEBI issued an interim order refraining the above-alluded individuals and entities from “connecting with any SEBI registered intermediaries, publicly listed companies or acting authorities of any public company contemplating to raise capital from the public.”

This incident is regarding the mishandling of funds by RHFL, for which its former auditors PriceWaterhouse & Co (PwC) had denied signing the annual accounts and then resigned themselves.

“An explicit scrutiny for the span of FY 2018-19 was initiated by the Securities and Exchange Board of India. The aim of this scrutiny was to exploratory investigate into the loan disbursal process by Reliance Home Finance Limited to many borrowers, to figure out if any provision of Securities Contracts Act, 1956, Securities and Exchange Board of India Act, 1992, Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003, Securities and Exchange Board of India Regulations, 2015, etc., have been breached.” The report informed. 

In the prosecution of the investigation, SEBI has probed information from numerous sources like the information available publicly, the information provided by the Bank of Baroda that also comprised a copy of the report of Forensic Audit conducted by the bank into the affairs of the company, information collected from the borrowers of the company, information provided by the company itself, statements recorded by different Key Managerial People during the investigation, etc. 

The sum of loans disbursed by RHFL under General Purpose Corporate Loans had soared rapidly from nearly Rs 900 crore in 2018 to nearly Rs 7,900 crore in 2019, the order informed.

The 100-page order has been passed against an aggregate of 28 entities (noticee) relating to the alleged mishandling of funds. 

These entities include Arion Movie Productions Pvt Ltd, Indian Agri Services Pvt Ltd, Adhar Project Management and Consultancy Private Ltd, Phi Management Solutions Pvt Ltd, Deep Industrial Finance Ltd, Citi Securities and Financial Services Pvt Ltd, Vinayak Ventures Pvt Ltd., Gamesa Investment Management Pvt Ltd, Medybiz Pvt Ltd, Tulip Advisors Pvt Ltd, Hirma Power Ltd, Netizen Engineering Pvt Ltd, Mohanbir Hi-Tech Build Pvt Ltd, Azalia Distribution Ltd. and Crest Logistics and Engineers Pvt Ltd (now Cle Pvt Ltd) are among the list of the noticee.

Other noticee(s) include Reliance Cleangen Ltd, Reliance Capital Ltd. Reliance Commercial Finance Ltd, Reliance Unicorn Enterprises Pvt Ltd, Reliance Business Broadcast News Holdings Ltd, Reliance Exchange next Ltd, Reliance Broadcast Network Ltd, and Reliance Big Entertainment Pvt Ltd. 

The regulator noted that the observations of prima facie are made solely on the grounds of the on record material and the prima facie findings shall also be taken into account as a show-cause notice.

Mr. S. K. Mohanty, SEBI’s whole-time member, acknowledged that the origin of these activities could be traced back to several sources that included a letter of resignation by PricewaterhouseCoopers to RHFL as its statutory auditor citing various reasons. SEBI had also received multiple grievances from people alleging the diversion of funds of the company by its authorities and management.

SEBI said its investigation has shed light on the fact how Anil Ambani, the Chairman, and the person under whose governance the company took decisions, has conducted himself in exceeding his remit by sanctioning loans in gross deviations of internal and regulatory norms.

“The management of affairs of legal entities constituting a listed corporate company like Reliance Home Finance Limited is administered by people who manage business operations and make business decisions for these entities. To safeguard the interest of shareholders of any listed company against any possible malfeasance through individuals engaging in unfair practices including ample provisions in form of restrictions, suspicious related-party transactions, compliances, and onerous exposure conditions covering multiple aspects of operations of a listed company, have been specified under the applicable corporate laws and securities laws.”, the report stated. 

The aftermath of this incident has made the Securities and Exchange Board of India refrain, Anil Ambani and his associates, from trading in the securities market until upcoming orders.