In Re matter of Reliance Home Finance Limited & Ors. (Securities and Exchange Board of India)
Facts- The Securities and Exchange Board of India on Reliance Home Finance Ltd and other individuals from dealing with the securities market directly or indirectly for allegedly siphoning off/diversion of funds from the company.
An investigation was undertaken by SEBI for the period of FY 2018-19. The focus of the said investigation was broadly to investigate into the manner in which the loans were disbursed by RHFL during the period of 2018-19 to several borrowing entities, so as to ascertain if any provision of SEBI Act, SCRA, SEBI (LODR Regulations) SEBI (PFUTP) Regulations etc., have been violated.
In pursuance of the said investigation, SEBI examined information from various sources, such as publicly available information, information provided by the Bank of Baroda including a copy of the report of Forensic Audit conducted by the bank into the affairs of the Company, information provided by the Company itself, information gathered from the borrowers of the Company, statements recorded by different Key Managerial Persons under oath during the investigation etc.
Conclusion-
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.
Looking at the conduct and propensity of the Company to indulge in such activities of diversion of funds and misrepresentation of books of accounts, falsification of financial statements resulting into non-disclosure of true & fair information to the public at large, and also considering the collective misconduct exhibited by the Key Managerial Persons of the Company, the SEBI said there is an urgent need that the Company should be prevented from pursuing such despicable activities which are visibly in violation of securities laws.
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 GPCL (general purpose corporate loan) 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 f 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.
Under the circumstances, there is a heavy preponderance of probabilities that the Company and the individuals comprising the Senior Management (named above), unless specifically prohibited, shall perpetuate their ill intent by indulging in such malpractices, which are prima facie njurious to the SEBI Act, 1992 and regulations made thereunder.
The foregoing prima facie observations contained in this Order, are made on the basis of the material available on record. The said prima facie finding shall also be considered as a show cause notice and the afore-said Noticees are directed to show cause as to why suitable directions/prohibitions under Section 11 (4) and 11B of SEBI Act.
FULL TEXT OF THE ORDER OF SECURITIES AND EXCHANGE BOARD OF INDIA
