SEBI bars Anil Ambani from security market for 5 years over diversion of funds
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The Securities and Exchange Board of India (SEBI) has imposed a five-year ban on industrialist Anil Ambani and 24 other entities, including former key officials of Reliance Home Finance Limited (RHFL), from participating in the securities market. The decision comes after SEBI uncovered a scheme involving the diversion of funds from the RHFL, orchestrated under Ambani’s leadership.
SEBI’s 222-page final order details how Anil Ambani, along with RHFL’s key managerial personnel, carried out a fraudulent scheme that siphoned off company funds by falsely categorising them as loans to entities linked to Ambani.
Despite repeated warnings and strong directives from the RHFL Board of Directors to halt such lending practices, the management continued these operations, highlighting a severe governance failure within the company.
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As part of the punitive measures, SEBI has also imposed a penalty of Rs 25 crore on Anil Ambani. He has been barred from holding any position as a director or Key Managerial Personnel (KMP) in any listed company or intermediary registered with SEBI for the next five years. Additionally, Reliance Home Finance itself has been banned from the securities market for six months and fined Rs 6 lakh.
The SEBI order emphasises that the illegal loans were extended to companies with little to no assets, cash flow, net worth or revenue, raising suspicions about the true intent behind these transactions. Many of these borrowers were closely tied to the promoters of RHFL, leading to further concerns about the integrity of the lending practices.
The fraudulent activities eventually caused significant financial harm to RHFL, as many of the loans went unpaid, leading the company to default on its own debt obligations. This default led to the company’s resolution under the Reserve Bank of India (RBI) Framework, leaving public shareholders at a substantial loss.
SEBI’s findings establish the existence of a “fraudulent scheme”, directed by Anil Ambani, leveraging his role as the chairperson of the ADA group and his substantial indirect shareholding in RHFL’s holding company. The regulator has concluded that this scheme was a deliberate attempt to divert funds from the publicly listed company to entities associated with Ambani, ultimately contributing to RHFL’s financial collapse.
