Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs1 crore on Jai Anmol Ambani, son of industrialist Anil Ambani, for his failure to exercise due diligence while approving general-purpose corporate loans in the Reliance Home Finance Ltd (RHFL) matter. SEBI also slapped a fine of Rs15 lakh on Krishnan Gopalakrishnan, who was the chief risk officer of Reliance Housing Finance.
In an order, Barnali Mukherjee, adjudicating officer (AO) of SEBI, says, "As can be observed that Mr Ambani had approved general-purpose corporate loans (GPCL) loans and that too after the board of directors had given clear direction not to go ahead with any approval of such loans. Jai Anmol Ambani, as non-executive director of the Company, has taken the Company in his own direction and has gone overboard in his role as director. He in doing so, gives a hint of being motivated and definitely not in the interests of the shareholders and has not acted with due care and diligence and has not maintained high ethical standards."
"Mr Gopalakrishnan had also approved various GPCL loans and was aware about the substantial deviations which were recorded in the credit approval memos of various loans which he had recommended while being the CRO of the Company. While being a part of the Senior Management of RHFL, he should have followed due process, complied with the code of conduct of the Company, and acted with due care and diligence in performing his duties and acted in good faith in the interest of all stakeholders of the Company," the AO says in the order.
On 11 June 2019, PricewaterhouseCoopers (PwC) decided to withdraw from the audit engagement with RHFL, citing certain acts of the company. SEBI asked PwC to submit details of its resignation and findings that had led to the firm's resignation. After PwC submitted its report, SEBI investigated the matter.
SEBI found during FY18-19, Rs8470.65 crore was disbursed as GPCL to 45 entities. It found an alleged mismatch of GPCL lending of Rs824.60 crore as per the submissions made by RHFL and the specified GPCL borrowers to SEBI. "Therefore, the total GPCL lending during the investigation period (IP) was Rs9295.25 crore (Rs8470.65 crore + unaccounted disbursals of Rs824.60 crore), which was disbursed to 45 financially weak entities having either negative or negligible net worth or no tangible assets, nil or negative operating cash flow, against their 97 loan applications."
"The GPCL borrowers were connected with Reliance Anil Dhirubhai Ambani (ADA) group based on having common addresses, common directors, common email IDs, past and current employment and cross holdings amongst themselves. GPCL borrowings were partly secured by the Guarantee given by Reliance ADA group as Reliance Power Ltd(R-Power) and Reliance Infrastructure Ltd (R-Infra), in favour of the GPCL borrowers to the extent of Rs2,970.32 crore, also indicating that the GPCL entities were directly or indirectly related to Reliance ADA group as the Reliance Power and Reliance Infrastructure were giving guarantees for the GPCL lending," SEBI says.
Based on the submission made by Ravindra Sudhalkar, chief executive officer (CEO) of RHFL, SEBI observed that the CEO was reported to Mr Ambani. "Jai Anmol Ambani, being executive director of the holding company (Reliance Capital Ltd) and a person to whom the CEO of RHFL was reporting, was observed to be at the helm of affairs of RHFL and responsible for taking strategic decisions of the company."
The AO of SEBI then imposed a penalty of Rs1 crore on Mr Ambani and Rs15 lakh on Mr Gopalakrishnan.
Last month, coming down heavily on Reliance Home Finance, Anil D Ambani, the chairperson of Anil Dhirubhai Ambani (ADA) group, several key managerial personnel (KMPs) and ADA group companies, the market regulator had slapped a penalty of Rs624.06 crore on 27 entities. While barring 25 entities, including Anil Ambani, from the securities market for five years, SEBI also restrained the ADA group chief and KMPs of RHFL from being appointed as directors or associated with any listed company.
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