On Friday, the Securities Exchange Board of India (SEBI) banned Reliance Home Finance Limited (RHFL), industrialist Anil Ambani, Amit Bapna, Ravindra Sudhakar and Pinkesh R Shah from the securities for alleged fraudulent activities related to the company for three months. Moreover, the 4 individuals were also restrained from associating with any listed entities.
It is alleged that they misused funds of the company and diverted them to other group companies to pay off debts. PWC, the company’s auditors at the time, refused to sign their annual accounts and resigned. The regulator had also received fraud monitoring returns from several banks which said that RHFL borrowed funds from lenders which were partly used for repayment of loans. Furthermore, SEBI also received complaints that group companies and entities with weak financials were used to siphon funds from RHFL to entities connected to Reliance Capital, the promoter company.
SEBI was investigating the complaints and looking into the affairs of RHFL for fiscal year 2018-19 and discovered that omst of the allegations were true. So, to summarize, SEBI is alleging that the company has been involved in diversion of funds, misrepresenting accounting information and falsifying financial statements.
“..it is noted that the investigation of Sebi has already brought to light as to how the Noticee no. 2(Anil Ambani), (the Promoter/Chairman and the person under whose control and influence the Company has acted), has conducted himself in exceeding his remit by sanctioning loans in gross deviations of norms (internal as well as regulatory) and also by going against the explicit directives of the Board of Directors by virtue of which such loans ought to have been stopped from being sanctioned, he sanctioned further GCPL to various connected entities. Such a misconduct on the part of Noticee no. 2 (Anil Ambani) as the chairman of the company smacks of fraudulent intent of the top management of the company, first, to divert the borrowed funds of the company meant to be advanced to genuine 3rd party borrowers to the coffers of various promoter group entities under the garb of series of sham GPC (general corporate purpose) lending, and then to cover up the losses & NPA (non performing asset) arising out of such transactions by concealing actual financial health of the company from the shareholders and general investing public, who could never know the real financial status of RHFL by looking at the cooked up books of accounts presented to them through the stock exchanges,” SEBI said in its 100-page order.
Highlight by Aman Agarwal.