Sebi bans Anil Ambani from security market for 5 years, slaps Rs 25 crore fine

Chandigarh/New Delhi, August 23

In a significant development, the Securities and Exchange Board of India (Sebi) has barred industrialist Anil Ambani and 24 other entities, including key former officials of Reliance Home Finance Ltd (RHFL), from the securities market for five years. It has also imposed a penalty of Rs 25 crore on the industrialist, alongside penalties on other individuals and entities involved.

‘Misappropriated company capital’

• Sebi outlined how Ambani leveraged his position as chairperson of ADA Group and his indirect control over RHFL to collaborate with key managerial personnel to misappropriate company funds
• These funds were disguised as loans extended to entities linked to Ambani, which were often financially unviable

The decision follows a detailed investigation into allegations of fund diversion from RHFL, revealing a fraudulent scheme orchestrated by Ambani and his associates. For his alleged conduct, the Sebi has imposed a penalty of Rs 25 crore on Anil Ambani and barred him from holding any position as a director or key managerial personnel (KMP) in any listed company or intermediary registered with the market regulator for the next five years.

In its 222-page order, Sebi outlined how Ambani leveraged his position as chairperson of the ADA Group and his indirect control over RHFL to collaborate with the company’s key managerial personnel (KMP) to misappropriate company funds.

These funds were disguised as loans extended to entities linked to Ambani, which were often financially unviable and lacked sufficient assets or revenue.

According to the Sebi order, the facts of the case were particularly disturbing as they revealed a complete breakdown of governance in a large listed company apparently orchestrated by, and/or, at the behest of the promoter aided by the indulgent KMPs of the company.

The company which was subject to the regulatory framework laid down by NHB and subsequently RBI (as an HFC) as well as by SEBI (as a listed company) did not seem to care about the need to maintain high standards of governance, Sebi observed.

According to the order, the investigation found the “existence of a fraudulent scheme, orchestrated by Anil Ambani and administered by the 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’ that is, entities associated/linked with Anil Ambani”.