A public listed company (RHFL) was involved in siphoning off ...

Fraud by promoter & key execs siphoned funds from listed RHFL via sham loans to shell firms; misled public.

Case Laws     SEBI

September 6, 2024

A public listed company (RHFL) was involved in siphoning off funds by structuring them as 'loans' to creditworthy conduit borrowers, resulting in disproportionate lending and moving funds to non-descript, financially weak privately held companies connected with the Reliance ADA group. Adequate disclosures were not made to public shareholders, violating securities laws. The fraud involved a complete breakdown of governance orchestrated by the promoter (Noticee No. 2 - Anil Ambani) and aided by key managerial personnel (KMPs). The KMPs (Noticees 3-5) played an active role, defying board directives and making false disclosures. Most borrower accounts turned NPAs, leading to RHFL defaulting on payments and resolution under RBI framework, severely impacting public shareholders. The order established a fraudulent scheme to siphon funds through sham 'loans' to conduit borrowers linked to Noticee No. 2. Directions were issued restraining Noticees from accessing securities market, associating with listed companies/intermediaries, and imposing penalties for violating securities laws and damaging market integrity.

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