The Securities and Exchange Board of India (SEBI) on Friday restrained Reliance Home Finance, businessman Anil Ambani and three others – Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah – from the securities market for allegedly siphoning off funds from the company.
In a 100-page interim order, the regulator also restrained the individuals from “associating themselves with any intermediary registered with SEBI, any listed public company or acting directors/promoters of any public company which intends to raise money from the public till further orders”.
The order was passed against 28 individuals and entities (noticees).
The focus of the SEBI investigation was on the manner in which loans were dispersed by Reliance Home Finance (RHFL) during 2018-19 to several borrowing entities.
SEBI noted that the root of the present proceedings can be traced to multiple sources, inter alia, a letter of Price Waterhouse & Co addressed to RHFL intimating their resignation as the statutory auditor of the company; and complaints received by SEBI alleging siphoning off/diversion of funds of RHFL by promoters and management of the company.
There were multiple Fraud Monitoring Returns (FMRs) from banks alleging, among others, that funds borrowed by RHFL from different lenders were partly used towards repayment of loans, the regulator said.
It was also complained that various connected parties and companies with weak financials were used as conduits to siphon off funds from RHFL to entities connected to the promoter company Reliance Capital, the order said.
“It is noted that one individual person Anil Ambani, who controls the company due to his position as a promoter and controlling shareholder by way his direct and indirect shareholding, is seen to be exercising unfettered powers…” SEBI said.
The order noted that the company’s top leaders, like executive director and CEO Ravindra Sudhalkar and the CFOs – Amit Bapna and Pinkesh R Shah – “instead of bringing such misdeeds to the notice of the board of directors/regulators, are prima facie found to be hand in gloves with Ambani, in siphoning off the borrowed funds of the company to other financially weak promoter group companies which is evident at different stages of approval of those general purpose corporate loans (GPCL) transactions”.
The amount of loans disbursed by RHFL under GPCLs have increased exponentially from around ₹900 crore as on March 31, 2018, to around ₹7,900 crore as on March 31, 2019, the order said.
The noticees include Adhar Project Management and Consultancy, Indian Agri Services, Phi Management Solutions, Arion Movie Productions, Citi Securities and Financial Services, Deep Industrial Finance, Azalia Distribution and Vinayak Ventures.
Gamesa Investment Management, Medybiz, Hirma Power, Tulip Advisors, Mohanbir Hi-Tech Build, Netizen Engineering and Crest Logistics and Engineers (now known as Cle Pvt Ltd) are among the noticees.
Other noticees are Reliance Unicorn Enterprises, Reliance Exchange Next, Reliance Commercial Finance, Reliance Cleangen, Reliance Business Broadcast News Holdings, Reliance Broadcast Network, Reliance Big Entertainment and Reliance Capital.
The regulator noted that the prima facie observations contained in the order are made on the basis of the material available on record and the prima facie findings shall also be considered as a show cause notice.
“The noticees (noticee nos. 1 to 28) are further called upon to show cause as to why inquiry should not be held against them… (for) alleged violations of provisions of SEBI Act, 1992, LODR Regulations and PFUTP Regulations,” SEBI said, adding that the noticees can file their replies within 21 days of receiving the order.
They can also indicate whether they desire to avail an opportunity of personal hearing on a date and time to be fixed in that regard.
SEBI also clarified that the restraint imposed on RHFL should not come in the way of any resolution/revival plan approved or to be approved, under any law.