Mumbai: Almost three months after issuing show-cause notices to Anil Ambani, chairman of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), as well as a few group companies on “certain dealings” that allegedly violated overseas debt norms, the capital market regulator, Securities and Exchange Board of India (Sebi), plans to issue an ultimatum to Ambani and others.
No-show: R-Adag chief Anil Ambani and four other group executives didn’t appear for hearings called by the capital market regulator. Pankaj Nangia / Bloomberg
Sebi had first issued show-cause notices to eight R-Adag entities on 9 June. It had directed the entities to inspect the documents and reply to the notices by 30 June. They didn’t inspect the documents or file any replies.
Subsequently, on 21 July, the entities were given a chance for personal hearings on 2 August.
A show-cause notice is not an indictment and only requires an entity to explain its position, typically within three weeks from the date of the notice.
Only Reliance Natural Resources Ltd (RNRL) and Reliance Infrastructure Ltd (R-Infra), through their advocate, attended the hearing on 2 August.
They had also sought inspection of documents and postponement of the hearing.
Others—Ambani (cited in the notice as chairman of RNRL, and chairman and managing director of R-Infra), and four executives, Satish Seth, vice-chairman of R-Infra, S.C. Gupta, J.P. Chalasani and Lalit Jalan, directors of R-Infra— didn’t appear for the hearing or respond to the show-cause notices.
An R-Adag spokesperson declined to comment for this story.
Sebi, on 2 August, again asked Ambani, RNRL, R-Infra and the four senior executives of R-Infra for explanations on the dealings by first inspecting the related documents kept with the regulator before 17 August, reply to the show-cause by 27 August and appear for a hearing on 3 September.
But the company, according to a senior Sebi official, has neither inspected the documents nor appeared for the hearing within the time frame given.
“Instead, an extension was sought by the company. We have given them up to a month’s time to reply to the show-cause and attend the hearing,” the Sebi official told Mint on condition of anonymity as the matter is sensitive.
Deepak Sanchety, advocate for RNRL and R-Infra, and the company secretaries of the two firms, attended the hearing on 2 August.
“They agreed for an inspection only a few days back. They did not appear for a hearing on 3 September as they wanted an extension of the dates for the hearing and responding to the show-cause,” said the Sebi official.
“We cannot just keep postponing the hearing indefinitely. They should reply to the show-cause notices and explain their stance within the next few weeks. If they fail to do so, we will decide if a binding order could be passed,” added the official.
While responding to a show-cause, an entity can apply for a consent to dispose of a case. Such a consent can be granted by Sebi in lieu of a certain consent fee and/or by certain other penalties. Sebi’s order on consent can be further contested at the appellate tribunal.
Neither Sebi nor the company have provided details of the case, but an official familiar with the development said, “The bank account of the R-Adag companies with UBS was allegedly misused by some entities. The company had raised some debt overseas. More than what was raised through external borrowings were transferred to the company’s account and the dealings were done without the knowledge of the company.”
The official did not want to be named as he is not authorized to speak to the media.
In 2009, government agencies investigated dealings by a less-known foreign institutional investor Pluri Emerging Companies that had bought participatory notes with RNRL and R-Infra stocks as the underlying securities. The enforcement directorate (ED) probed Pluri for a series of allegedly fraudulent dealings, involving the siphoning of money from the UBS London branch accounts of two R-Adag firms.
The money in the UBS London accounts came from foreign loans, or external commercial borrowings (ECB), by R-Adag companies.
In a written reply to a query raised in the Rajya Sabha, the Union government had on 1 December 2009 said that three R-Adag firms—R-Infra, RNRL and Reliance Communications Ltd—had violated overseas debt norms.
In a written reply, minister of state for finance Namo Narain Meena had said end-use violations had been observed by the Reserve Bank of India (RBI) regarding two ECB transactions—of $360 million (Rs1,674 crore today) and $150 million—by R-Infra.
The company brought the proceeds raised through ECBs to India and these were not deployed for the declared end-use in violation of existing guidelines, he said.
RNRL had issued foreign currency convertible bonds worth $300 million for the purpose of pursuing projects under the automatic route. As much as $275 million was brought to India in May 2007 and was parked in debt mutual funds pending utilization.
Subsequently, in August 2008, an amount of Rs1,160 crore was invested in a wholly owned subsidiary in Singapore, the minister said.
Since the alleged transactions have a cross-border angle and since RBI does not have privileges of investigation, the issue had been referred to ED for investigation, the minister had said.
Aveek Datta contributed to this story.