SEBI Imposes Five-Year Ban and ₹25 Crore Fine on Anil Ambani Over Fraudulent RHFL Scheme

The Securities and Exchange Board of India (SEBI) has barred industrialist Anil Ambani and 24 other individuals and entities from accessing the securities market for five years, following their involvement in a fraudulent scheme that resulted in the diversion of funds from Reliance Home Finance (RHFL).

Alongside the ban, SEBI has imposed a ₹25 crore fine on Ambani and prohibited him from serving as a director or in any key managerial position in a listed company during this period.

SEBI’s investigation uncovered a complex scheme where RHFL distributed substantial loans totalling ₹9,295.25 crore to 45 General Purpose Working Capital Loans (GPCL) entities.

Of this amount, ₹4,944.34 crore was allocated to 13 specified GPCL borrowers, who subsequently lent ₹4,013.43 crore to nine promoter-related entities.

The probe revealed that these transactions were part of a coordinated effort to channel funds from RHFL to financially unstable companies linked to the Reliance ADA Group, leading to non-performing assets (NPAs) of ₹6,931.31 crore as of September 30, 2021.

"Credit defaults in the financing sector are not inherently unusual or indicative of fraudulent activity. Inter-corporate loans or related party transactions (provided they are disclosed and compliant with legal requirements) are not necessarily illegal or suspicious.

“However, the facts and circumstances of this case clearly suggest that the defaults were the result of a sophisticated and coordinated scheme to divert funds from the publicly listed company to obscure and financially weak privately held companies associated with the Reliance ADA group," the order stated.

The case revealed severe governance failures within RHFL, with key management personnel (KMPs) including Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah allegedly ignoring directives from the Board of Directors to cease lending to certain corporate entities.

Statutory auditor PricewaterhouseCoopers (PWC) and forensic auditor Grant Thornton concluded that these loans were part of a fraudulent scheme, implicating Ambani as the principal orchestrator.

In his order, Whole-Time Member Ananth Narayan G remarked: "Compared to a well-regulated financial system where even small loans are subject to multiple checks and restrictions, the management and promoter’s reckless approval of loans amounting to hundreds of crores to companies with minimal assets, cash flow, net worth, or revenues, suggests a sinister motive behind these ‘loans.’"

The fraudulent activities resulted in significant financial losses for RHFL, dramatically affecting its shareholders. The company’s share price fell from ₹59.60 in March 2018 to ₹0.75 by March 2020, leaving over nine lakh shareholders with substantial losses.

SEBI has also banned RHFL from accessing the securities market for six months and imposed a ₹6 lakh fine on the company. The total fines levied by SEBI on all 27 entities involved in the scam amount to over ₹625 crore.

The identified violations include breaches of various regulations such as the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015; SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, 2003; and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

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