Anil Ambani has resigned from the boards of directors of both Reliance Power and Reliance Infrastructure, a month after the Securities and Exchange Board of India (SEBI) banned him from trading in securities or being associated with any listed companies, news agency PTI reported on Friday, 25 March.
Ambani's resignations were conveyed to the Bombay Stock Exchange in regulatory filings by the two companies, which noted that this move was made to comply with an interim order passed by SEBI over allegations that he and three other associates had siphoned off funds from a different Reliance entity, Reliance Home Finance Limited (RHFL).
The SEBI interim order, passed on 12 February, had barred Ambani and the other three persons from "associating themselves with any intermediary registered with SEBI, any listed public company or acting directors/ promoters of any public company which intends to raise money from the public till further orders."
As both Reliance Power and Reliance Infrastructure are listed on the BSE, he had to step down or violate the SEBI order.
The Reliance Group chairperson's resignation is not necessarily set to be a long-term one, as the SEBI order is an interim one, and the matter has not been finally decided. In the event it is found that he did not actually engage in any financial irregularities at RHFL, or a court quashes/stays the SEBI order, he will be able to return to the boards of the two listed companies.
The SEBI proceedings do not allege any wrongdoings by Ambani in connection with the two listed companies.
Following Ambani's resignation, the two companies have appointed Rahul Sarin, a retired civil servant who formerly held the position of Secretary to the Government of India, as an additional director, PTI reported.
The SEBI proceedings deal with claims that Ambani, along with Amit Bapna, Ravindra Sudhalkar and Pinkesh R Shah had been involved in financial irregularities at the RHFL.
The matter came to light after auditing firm PwC resigned from being statutory auditors for the RHFL after failing to get proper responses from the company about its GPC (general purpose corporate) lending , which had skyrocketed from Rs 900 crore as on 31 March 2018 to around Rs 7,900 crore as on 31 March 2019.
They found a number of irregularities with the borrowers to whom these loans were being given, including to persons and entities with negative net worth, no revenues and no earnings, according to Business Standard.
Further concerns about the GPC lending were also raised by a consortium of lenders to the RHFL, led by Bank of Baroda. A forensic audit commissioned by them alleged that over Rs 12,000 crore was issued in GPC loans to entities which were potentially linked to the company and its promoters, in violation of regulations.
Many of these loans were then declared Non-Performing Assets (NPAs) so that there was no process to recover the loans, which SEBI considered in its interim order to amount to a "collusive nexus" to siphon funds from the RHFL.
“Such misconduct on the part of Noticee no. 2 (Anil Ambani) as the chairman of the company/group 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 third-party borrowers to the coffers of various promoter group entities under the garb of series of sham GPC (general purpose corporate lending) and then to cover up the losses & NPA 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 interim order, as reported in Business Standard
(With inputs from PTI and Business Standard.)