The Directorate of Enforcement (ED) has summoned Anil Ambani, chairman and managing director of Reliance Group, for questioning in connection with its ongoing investigation into an alleged ₹17,000-crore loan fraud case. He's been asked to appear on August 5 at ED headquarters in the Capital, people in the know told ET.
ED last week carried out searches at multiple entities and individuals linked to Anil Ambani's Reliance Group across 35 locations in Mumbai, covering 50 companies and 25 individuals under the Prevention of Money Laundering Act ( PMLA).
In a related development, the Securities and Exchange Board of India (Sebi) shared with ED and two other agencies the findings of a separate probe, launched by it into alleged diversion of `10,000 crore by Reliance Infrastructure (R Infra). Sebi’s report, accessed by ET, alleged R Infra diverted a large amount of money disguised as intercorporate deposits (ICDs) to Reliance Group units through CLE Pvt Ltd, an undisclosed related party company.
CLE is said to be the ‘C’ company that had cropped up during investigation and was the subject of much speculation.
The engineering, procurement and construction firm has its office at Nehru Road, Vakola, Santacruz (East), Mumbai.
A person close to Reliance Group questioned the findings. “Reliance Infrastructure publicly disclosed this matter on February 9, and Sebi did not make any independent discovery. Reliance Infra had an exposure of Rs 6,500 crore. The allegation that the diverted amount is Rs 10,000 crore only serves to sensationalise the magnitude and is not based on facts,” the person told ET. “When the exposure was Rs 6,500 crore, how can the diversion be Rs 10,000 crore? Reliance Infra diligently pursued recovery of its dues in this matter.
Reliance Infra arrived at a settlement to recover its entire exposure of Rs 6,500 crore through mandatory mediation proceedings conducted by a retired Supreme Court Judge and filed before the Bombay High Court, the person said.
“Odisha distribution companies contemplated in the settlement are operational, and their recovery is pending before the courts,” he added. “This amount is fully recoverable, contrary to the allegations.” The person also denied receipt of any notice from Sebi on the matter.
In the second week of May, Sebi sent a formal communication to ED, the National Financial Reporting Authority (NFRA) and the Insolvency and Bankruptcy Board of India (IBBI) to look into the matter independently. The market regulator’s investigation found alleged non-compliance with approval and disclosure norms on related party transactions. “This camouflaged the material diversion of funds to the undisclosed related part as genuine business transactions,” according to the Sebi report.
The regulator said non-compliance with statutory provisions resulted in R Infra “withholding crucial information in its financial statements with respect to diversion of funds for the ultimate benefit of its promoter and related entities.”
It added that “by considering CLE as a third party company, R Infra avoided accurate and meaningful disclosures of specific fair value adjustments… and thereby misstated the financial statements… the misstatement continues till date.”
Company dealings
According to the Sebi report, R Infra had various financial dealings with CLE in the form of ICDs, investments in equity and corporate guarantees. As of March 31, 2022, this amounted to Rs 8,302 crore. Sebi’s investigations are for the period between FY16 and FY23.
The report said that from FY17 to FY21, R Infra had written off Rs 10,110 crore on account of fair value adjustment, provisions, impairment etc.
It added that R Infra “continued to provide advances to CLE despite recognising incapacity of CLE to repay the loans, that is, even after creating provision of doubtful debts in one year, they continued to extend loans in the same or subsequent years.”
The Sebi report said that from FY13 to FY23, total outstanding annual expenditure on CLE by R Infra was 25-90% of the latter’s total assets.
The markets regulator said R Infra allegedly did not disclose CLE as its related party in order to avoid having to obtain approval from the shareholder and audit committees, and the checks and balances imposed on related-party transactions as per law.
Sebi found CLE to be a related party of R Infra on the basis of documentation. These included submissions made by CLE to Yes Bank in order to avail of loans acknowledging Reliance Infra is one of its promoters. Reliance Infra audit committee meeting minutes mention CLE as a group company. Signatories of CLE’s bank accounts were all having email IDs from the Reliance ADA group domain, that is, @relianceada.com.
Other supporting data include statements of key management personnel (KMPs) recorded during the Sebi investigation. Also, directors and KMPs appointed in CLE were directors and executives of Reliance Group.
Sebi’s report alleged that Anil Ambani, by virtue of his position as chairman of Reliance Group (formerly Reliance ADAG), held over 40% shareholding in Reliance Infrastructure entities in which he had significant control and influence till March 2019. He was also nonexecutive chairman and director in R Infra till March 25, 2022.
ED last week carried out searches at multiple entities and individuals linked to Anil Ambani's Reliance Group across 35 locations in Mumbai, covering 50 companies and 25 individuals under the Prevention of Money Laundering Act ( PMLA).
In a related development, the Securities and Exchange Board of India (Sebi) shared with ED and two other agencies the findings of a separate probe, launched by it into alleged diversion of `10,000 crore by Reliance Infrastructure (R Infra). Sebi’s report, accessed by ET, alleged R Infra diverted a large amount of money disguised as intercorporate deposits (ICDs) to Reliance Group units through CLE Pvt Ltd, an undisclosed related party company.
CLE is said to be the ‘C’ company that had cropped up during investigation and was the subject of much speculation.
The engineering, procurement and construction firm has its office at Nehru Road, Vakola, Santacruz (East), Mumbai.
A person close to Reliance Group questioned the findings. “Reliance Infrastructure publicly disclosed this matter on February 9, and Sebi did not make any independent discovery. Reliance Infra had an exposure of Rs 6,500 crore. The allegation that the diverted amount is Rs 10,000 crore only serves to sensationalise the magnitude and is not based on facts,” the person told ET. “When the exposure was Rs 6,500 crore, how can the diversion be Rs 10,000 crore? Reliance Infra diligently pursued recovery of its dues in this matter.
Reliance Infra arrived at a settlement to recover its entire exposure of Rs 6,500 crore through mandatory mediation proceedings conducted by a retired Supreme Court Judge and filed before the Bombay High Court, the person said.
“Odisha distribution companies contemplated in the settlement are operational, and their recovery is pending before the courts,” he added. “This amount is fully recoverable, contrary to the allegations.” The person also denied receipt of any notice from Sebi on the matter.
In the second week of May, Sebi sent a formal communication to ED, the National Financial Reporting Authority (NFRA) and the Insolvency and Bankruptcy Board of India (IBBI) to look into the matter independently. The market regulator’s investigation found alleged non-compliance with approval and disclosure norms on related party transactions. “This camouflaged the material diversion of funds to the undisclosed related part as genuine business transactions,” according to the Sebi report.
The regulator said non-compliance with statutory provisions resulted in R Infra “withholding crucial information in its financial statements with respect to diversion of funds for the ultimate benefit of its promoter and related entities.”
It added that “by considering CLE as a third party company, R Infra avoided accurate and meaningful disclosures of specific fair value adjustments… and thereby misstated the financial statements… the misstatement continues till date.”
Company dealings
According to the Sebi report, R Infra had various financial dealings with CLE in the form of ICDs, investments in equity and corporate guarantees. As of March 31, 2022, this amounted to Rs 8,302 crore. Sebi’s investigations are for the period between FY16 and FY23.
The report said that from FY17 to FY21, R Infra had written off Rs 10,110 crore on account of fair value adjustment, provisions, impairment etc.
It added that R Infra “continued to provide advances to CLE despite recognising incapacity of CLE to repay the loans, that is, even after creating provision of doubtful debts in one year, they continued to extend loans in the same or subsequent years.”
The Sebi report said that from FY13 to FY23, total outstanding annual expenditure on CLE by R Infra was 25-90% of the latter’s total assets.
The markets regulator said R Infra allegedly did not disclose CLE as its related party in order to avoid having to obtain approval from the shareholder and audit committees, and the checks and balances imposed on related-party transactions as per law.
Sebi found CLE to be a related party of R Infra on the basis of documentation. These included submissions made by CLE to Yes Bank in order to avail of loans acknowledging Reliance Infra is one of its promoters. Reliance Infra audit committee meeting minutes mention CLE as a group company. Signatories of CLE’s bank accounts were all having email IDs from the Reliance ADA group domain, that is, @relianceada.com.
Other supporting data include statements of key management personnel (KMPs) recorded during the Sebi investigation. Also, directors and KMPs appointed in CLE were directors and executives of Reliance Group.
Sebi’s report alleged that Anil Ambani, by virtue of his position as chairman of Reliance Group (formerly Reliance ADAG), held over 40% shareholding in Reliance Infrastructure entities in which he had significant control and influence till March 2019. He was also nonexecutive chairman and director in R Infra till March 25, 2022.
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