This exceptionally beleaguered Reliance Group of Anil Ambani has now come under renewed scrutiny by the Ministry of Corporate Affairs (MCA), which has ordered an SFIO investigation into allegations of significant transfer of funds across its various companies.
The investigation has been ordered by the MCA after its preliminary findings suggesting serious violations of the Companies Act.
All of this comes as additional regulatory action against this debt-ridden conglomerate, which is already under the scanner of several of the country’s central agencies, including the Enforcement Directorate (ED), the Central Bureau of Investigation (CBI), and the Securities and Exchange Board of India (SEBI).
The inquiry is expected to zero in on complex financial transactions and movement of money between various group entities with the intent of fixing accountability at senior management level.
Corporate Governance Under Scanner
The primary mandate of the SFIO is to trace with utmost care the trail of alleged siphoned funds down the corporate structure of the Reliance Group. Important to this investigation are firms like Reliance Infrastructure, Reliance Communications (RCOM), and Reliance Commercial Finance.
Investigators will be looking for irregularities in financial disclosures and possible misuse of funds. The findings of the preliminary review reportedly provided indications that the funds were allegedly routed through complex multi-layered transactions and related parties in disregard to best corporate governance practices and breach of loan covenants.
The investigation focuses on whether the money raised for specific business purposes was used either to “evergreen” or repay older debts, thereby masking the true state of financial affairs of the companies concerned.
Multi-Agency Crackdown Escalates
The MCA has acted in unison with ED in pursuing their parallel actions. Just days before the SFIO takeover, ED provisionally attached assets worth around ₹7,500 crore from various Reliance Group companies, including those linked to Reliance Infrastructure.
This attachment relates to a multi-crore bank fraud case with regard to loan facilities availed by RCOM and its affiliates between 2010 and 2012, as per ED. These loan accounts were declared fraud by five major banks, with outstanding dues in excess of ₹40,000 crore.
This multi-agency crackdown, involving ED, CBI, SEBI, and now the SFIO, heralds the beginning of a coordinated governmental effort to enforce corporate accountability and transparency.
This will constitute one of the most important regulatory challenges faced by the group in recent times. The consequences of the SFIO inquiry will have implications that are both legal and financial in nature.
A recent media graduate, Bhumi Vashisht is currently making a significant contribution as a committed content writer. She brings new ideas to the media sector and is an expert at creating strategic content and captivating tales, having working in the field from past four months.
