Mumbai, Aug 23 (IANS): The markets regulator Securities and Exchange Board of India (SEBI) on Friday barred industrialist Anil Ambani and 24 other entities for five years for diversion of funds from Reliance Home Finance Ltd.

The SEBI also fined Ambani Rs 25 crore and prohibited him from holding any position in the securities market, including roles as a director or key managerial personnel in listed companies, for the same duration.

Here are the five key reasons why the markets regulator took this action.

1. The SEBI investigation established the existence of a fraudulent scheme, orchestrated by Anil Ambani and administered by key executives of RHFL, to siphon off funds from the publicly listed company by structuring them as 'loans' to credit unworthy conduit borrowers. These entities have been found to be 'promoter-linked entities' with ties to Ambani.

2. The funds diverted to group companies and related entities amount to Rs 8,800 crore. The loans were given to companies with little to no assets, cash flow, net worth, or revenue. These include firms like Reliance Capital Ltd., Reliance Commercial Finance Ltd., Reliance Power Ltd., and Reliance Infrastructure Ltd.

3. Most of these borrowers failed to repay loans, leading RHFL to default on its own debt obligations. As a result, the company’s public shareholders have been left high and dry.

4. The market regulator and two forensic audits of PwC, which is the statutory auditor of RHFL, and Grant Thornton, the forensic auditor appointed by Bank of Baroda, which was the lead bank of the consortium of lenders of RHFL, found similar violations.

5. Strong directives from the RHFL board to stop lending practices were ignored by Anil Ambani, who used his position as chairperson of the Anil Dhirubhai Ambani Group.

In a 222-page order, SEBI said that Anil Ambani, with the help of RHFL's key managerial personnel, orchestrated a fraudulent scheme to siphon off funds from RHFL by disguising them as loans to entities linked to him.

"The Board of Directors of RHFL issued strong directives to stop such lending practices and reviewed corporate loans regularly but the company's management ignored these orders. This suggests a significant failure of governance, driven by certain key managerial personnel under the influence of Anil Ambani," it stated.

The other 24 entities which have been barred include Amit Bapna, Ravindra Sudhalkar and Pinkesh R. Shah -- former key officials of RHFL. The regulator levied a fine of Rs 27 crore on Bapna, Rs 26 crore on Sudhalkar, and Rs 21 crore on Shah.

The remaining entities -- Reliance Unicorn Enterprises, Reliance Exchangenext Lt, Reliance Commercial Finance Ltd, Reliance Cleangen Ltd, Reliance Business Broadcast News Holdings Ltd, and Reliance Big Entertainment Private Ltd -- were imposed a penalty of Rs 25 crore each. These fines were levied for "either receiving the illegally obtained loans or acting as intermediaries to facilitate the illegal diversion of funds from RHFL".