SEBI Imposes Penalty of Rs21 Crore on 52 Entities in Religare Finvest Fund Diversion Case
Moneylife Digital Team 02 November 2022
Capital markets regulator Securities and Exchange Board of India (SEBI) has imposed a fine totalling Rs21 crore on 52 entities, including Fortis Healthcare Holdings, in a case pertaining to huge diversion and mis-utilisation of funds of Religare Finvest, an arm of Religare Enterprises.
 
They have been asked to pay the fine within 45 days, according to an order passed by SEBI on Monday.
 
The case involves a complex web of transactions whereby the funds of listed company Religare Enterprises Limited (REL) were diverted through its subsidiary Religare Finvest Ltd. (RFL) for the ultimate benefit of the erstwhile promoters — RHC Holding, Malvinder Mohan Singh and Shivinder Mohan Singh. Funds were also misutilised for repayment of earlier loans taken from RFL.
 
“The whole scheme of fraud led to diversion of funds of Rs2473.66 crore out of a material subsidiary of REL and also mis-utilisation of funds of Rs487.92 crores of RFL,” SEBI said in its 390-page order.
 
Such a huge diversion and misutilisation of funds of RFL in which REL held 85.64% stake and which contributed 57% of consolidated revenue of RFL as on March 31, 2018 definitely abuses the assets of a listed company and in turn also affects the investors, it added.
 
The elaborate scheme was perpetrated to use the funds of a material subsidiary of a listed company for the ultimate benefit of the promoters.
 
The 52 entities include borrower or intermediate conduit entities through which the funds were transferred and entities that played a key role in the approval of grant of loans by RFL to various borrower companies.
 
While imposing penalties ranging from Rs2 lakh to Rs1 crore, SEBI has taken into consideration the quantum of funds diverted or mis-utilised amount facilitated by the entities.
 
Insofar as key managerial personnel (KMPs) or directors of REL, RFL, RHC Holding are concerned, the regulator has taken into consideration the position and responsibilities these officials were holding in such companies, amount of money diverted or misutilised and the tenure of the KMP/directors in the company.
 
SEBI has levied a fine of Rs1 crore on Bipin Kabra, who was the chief financial officer of RFL and a member of loan approving committees of RFL; Rs90 lakh each on Ranchem Private Limited and Fern Healthcare; Rs85 lakh on Torus Buildcon; Rs70 lakh each on Nishu Finlease, Sunil Kumar Garg and Maninder Singh; Rs30 lakh on SREI Infrastructure Finance; and Rs15 lakh on Fortis Healthcare Holdings.
 
The order came after the regulator received complaints during January and February 2018 on behalf of the shareholders against the company alleging financial mismanagement and diversion of funds primarily in RFL for the benefit of the promoters / promoter group companies of REL.
 
Following this, SEBI conducted an investigation to ascertain whether there was any violation of the regulatory norms during the period between April 2011 to March 2018.
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