SEBI rejects Anil Ambani group's settlement plea over alleged fund misuse

India's market regulator has rejected applications by industrialist Anil Ambani and his group to settle allegations of misusing company funds, according to documents reviewed by Reuters.

The Securities and Exchange Board of India (SEBI) last week turned down requests related to allegations that Ambani and Reliance Infrastructure were involved in improperly routing 65.26 billion rupees ($691 million) to entities linked to the controlling shareholder, the documents show.

Anil Ambani, the younger brother of billionaire Mukesh Ambani, has faced increased scrutiny from regulators and enforcement agencies over the past 18 months. Several group executives have been arrested on fraud charges, and some of Anil Ambani's properties have been frozen. The executives have denied wrongdoing, and the cases are pending in courts.

SEBI alleged in September that the transactions involving Ambani and Reliance Infrastructure amounted to a “mis-utilisation of company funds,” potentially for personal enrichment rather than serving a corporate purpose for public shareholders, the documents said.

A spokesperson for the Anil Ambani group said in an email: “The allegations are categorically denied. The matters are sub judice, and the Group will continue to defend its position as legally advised.” SEBI did not respond to a request for comment.

The regulator's rejection of the settlement requests and its specific allegations have not been previously reported. Reliance Infrastructure said in an October exchange filing that SEBI had alleged it violated rules over its financial exposure to a connected entity, without disclosing details.

In rejecting the settlement applications, SEBI cited parallel investigations by other Indian enforcement agencies, including the financial crime and fraud investigative agencies, the documents showed.

This is the second settlement rejection for Ambani. SEBI last year rejected his plea to settle allegations in a case related to investments in India's Yes Bank.

Under SEBI's settlement process, a company can pay a penalty to settle a case without admitting wrongdoing. If it rejects a settlement, SEBI typically issues a detailed public order outlining the alleged violations, with consequences ranging from monetary penalties to restrictions on accessing capital markets. Companies may appeal such orders in court.

Reliance Infrastructure is looking to raise funds from the public, having secured board approval to raise up to 30 billion rupees. The company previously disclosed an exposure of about 65.26 billion rupees to engineering contractor CLE Private Ltd, which it described as an independent entity.

But SEBI alleged a far larger movement of funds, saying Reliance Infrastructure diverted 176.7 billion rupees ($1.9 billion) to CLE, which then invested at least 112 billion rupees in firms linked to the Ambani-led Reliance ADA Group over a decade through 2024. SEBI determined that, “for all practical purposes, CLE functioned as a Reliance ADA Group company” that was “indirectly controlled” by Ambani and a few other officials, according to the documents.

An email seeking comment from CLE, sent to its last cited address in India's company registry, was not immediately answered.