A Cobrapost investigation has revealed a major banking fraud. Anil Ambani led Reliance ADA Group is involved in this fraud. Since 2006, the group had engaged in the misappropriation of funds. The total amount diverted is more than Rs 28,874 crore. In addition, US$ 1.53 billion was transferred through suspicious transactions. These funds came from bank loans, IPOs and bonds. Cobrapost has revealed a complex web of transactions.
The investigation found that Reliance ADA Group diverted a large amount of money. This took place over several years, beginning in 2006. These funds were taken from companies listed within the group. These companies are owned by Anil Ambani and his family.
Initial conclusions and scope
Cobrapost found that Rs 28,874 crore had been fraudulently diverted. Also, US$1.53 billion was brought into India through “suspicious” transactions. It also includes a mysterious US$750 million loan. This loan was given to a Singapore company and then disappeared. Another US$785 million came from external commercial borrowings. This money was also transferred suspiciously to different ADA Group companies.
Main companies involved
Several large companies of Reliance ADA Group played a role in these activities. These include:
Investigators found dozens of shell companies. These were both inside and outside India. They helped in transferring funds and hiding the real flow of money.
A clear example of fraudulent misuse of money is related to a luxury yacht. Anil Ambani bought this yacht in 2008. US$20 million was diverted from Reliance Communication for this purchase.
A gift with a dubious source
Anil Ambani gifted this luxury yacht to his wife Tina Ambani in 2008. He bought it from Ferretti Spa in Italy. Amolite Holdings, a company of ADA Group, had made this purchase. The yacht was named by combining their names. This caused a lot of uproar in the media. Customs officials also took note of this purchase. He imposed a bill of Rs 28 crore on ADA Group Company. This happened when the yacht was docked near the Gateway of India, Mumbai. Custom expropriated it in February 2009. After this the company went to Bombay High Court. Later he withdrew the petition for settlement outside the court.
Disclosure of complex transactions
The purchase of the yacht was not straightforward. It involved a roundabout way of money using questionable methods. Reliance Communication had arranged US$20 million for the yacht. Singapore-based Gateway Net Trading Private Limited routed these funds. These funds passed through Reliance Transport and Travels. Gateway Net Trading is a wholly owned subsidiary of Reliance Communication.
Reliance Transport and Travels was earlier given the task of purchasing the yacht. The work was then given to Amolite Holdings Ltd. Amolite Holdings received US$400,000 for this one-year contract. An agreement was signed on 22 October 2008. Reliance Capital held a 50% stake in Amolite Holdings.
Shell company and its role
Amolite Holdings had entered into an agreement with Gateway Net Trading. The agreement was to supply 10 million mobile handsets. However, Amolite Holdings did not purchase mobile phones. He never supplied any handset. Instead, Amolite Holdings bought the yacht from Ferretti Spa for 11,640,875 euros. Gateway Net Trading paid Ferretti S.p.A. over US$18 million on instructions from Amolite Holdings.
In the last step, Reliance Capital wrote off its investment in Amolite Holdings. Amolite Holdings had just US$2,000 in capital. He had no real business. This shows that it was a shell company. In this way money was diverted from Reliance Communication, which was a resourcefully listed company.
Impact on Reliance Communication
This incident had a very bad impact on Reliance Communication. The company’s debts began to increase. The company’s efforts to protect itself failed. It had also raised Rs 4,800 crore from investors in 2014. Eventually, Reliance Communication went bankrupt in 2023. This is a loan of more than Rs 47,000 crore to more than 45 banks, a company of ADA Group.
Reliance Infrastructure is the largest company of Anil Ambani-led ADA Group. It works in many sectors. These include infrastructure development, power projects and defence. Reliance Infra also acts as a construction contractor for Reliance Power. Anil Ambani and Reliance Infra promote Reliance Power. He has a big stake in it.
Billions of rupees were diverted through complex schemes
Cobrapost’s investigation revealed that Reliance Infrastructure diverted around Rs 14,529 crore. These funds were sent from group companies to shell and offshore companies. Then, they reverted to promoter group companies.
CL Private Limited SPV Scheme
A Special Purpose Vehicle (SPV) named CL Private Limited was built. Its purpose was to withdraw funds. These funds came from Reliance Infrastructure, Reliance Capital, Reliance Home Finance and Reliance Commercial Finance. This was done through debentures and non-convertible redeemable preference shares.
The funds were misappropriated as follows:
1. First step: Rs 14,529.18 crore taken from Reliance Infrastructure, Reliance Capital and Reliance Commercial Finance.
2. Step 2: Another SPV, CLVT Ltd, was created to withdraw these funds.
3. Step 3: The withdrawn funds were diverted to different companies. This happened through debentures and loan advances. A multi-layered corporate ownership system was created.
4. Step 4: These companies merged into Edico Ventures. Edico Ventures then remitted the funds to offshore companies. All funds were gradually written off.
5. Last step: Six of the 25 companies involved merged into Promoter Group companies. This occurred after the diversion was completed.
CLVT Limited was renamed several times. This was done to hide the diversion. For more information about these results, you can view the Annexer ADAG Response.
Role of Yes Bank
Cobrapost found that Rs 10,049.28 crore was withdrawn from Reliance Infrastructure. Reliance Capital, Reliance Commercial Finance and Reliance Home Finance also contributed. The surprising thing is that Yes Bank was also the source of some funds. It contributed Rs 800 crore to the total diverted amount. The Enforcement Directorate (ED) is currently investigating Anil Ambani for suspicious transactions with Yes Bank.
Hiding the transfer
Edico Venture Limited also helped transfer and consolidate diverted funds. These funds went to CL Private Limited, another shell company. These were in the form of debentures and non-convertible redeemable preference shares. These funds were later returned to the promoter group companies at a high premium. Reliance Infrastructure had also guaranteed these shell companies.
Cobrapost identified at least 23 companies used for fund diversion from CL Pty Ltd. They also detected Rs 8,752 crore diverted as CCD and NCRPS. These funds were further diverted to promoter group companies. Another set of SPV or pass-through companies were used for this.
To hide fraudulent diversions, promoter group companies adopted a clever method.
1. First step: Of the 26 companies involved in the diversion, 25 companies were merged into promoter group companies. This occurred within 3-4 years of the fund being transferred.
2. Step 2: CL Private Limited changed its name several times. It went from Crest Logistics & Engineers Pty Ltd to Sonata Investments Ltd. This name change was done to hide the fraud.
Reliance Capital committed a huge fraud in collaboration with its subsidiary companies. These subsidiary companies include Reliance Home Finance Limited, Reliance Commercial Finance Limited and Reliance Corporate Advisory Services Limited. Together they embezzled more than Rs 14,344 crore. Money disappeared into thin air.
Layers of deception
In this fraud, public funds were taken as loans from banks. The money was then rotated through several layers. This erased the evidence and the funds went into the family’s account. The aim was to hide the identity of those who got the real benefits.
Cobrapost found that Reliance Home Finance embezzled more than Rs 7,965 crore. Reliance Commercial Finance embezzled Rs 4,979 crore. Reliance Corporate Advisory Services embezzled Rs 1,400 crore. These funds came out of Rs 37,000 crore that Reliance Capital and Reliance Home Finance had borrowed from banks. He did not repay this loan.
Daman Housing Connection
Reliance Home Finance embezzled Rs 7,965 crore by giving loans to 49 companies. These loans accounted for more than 50% of its total loan book. One company involved in this was Vadwan Holdings Private Limited. It is a company of Vadwan brothers of Dewan Housing and Finance Limited. The embezzled funds were finally returned to 14 companies of Anil Dhirubhai Ambani Group. This made them richer at the expense of lenders and shareholders.
Four of these companies received more than Rs 7,712 crore of the embezzled funds:
Shocking audit of Bank of Baroda
In March 2011, Reliance Capital had a debt of Rs 18,483.02 crore. Bank of Baroda, a major lending bank, audited its loan transactions with Reliance Home Finance Limited. The audit found that Reliance Home Finance had given loans to potentially linked companies. It took place between 1 April 2016 and 30 June 2019. This means that Reliance Capital did not inform SEBI about these related party transactions. The audit report revealed some serious points:
Despite this audit, the banks did not take any strict action. He did not use corporate guarantees to recover dues. He also did not file an FIR for fraud. Instead, they chose the Corporate Insolvency Resolution Process. They went to the National Company Law Tribunal.
Results for lenders and investors
In 2019, Ericsson, a telecom company, claimed Rs 458.77 crore from Reliance Communications. The Supreme Court found Anil Ambani guilty of contempt. His brother intervened and paid the money to avoid going to jail. This shows that recovery is possible if the lenders are determined.
However, the National Company Law Tribunal approved a bid of Rs 9,861 crore for Reliance Capital. This bid came from IndusInd International Holdings Limited. This amount is much less than the arrears of Rs 26,089 crore. Investors suffered huge losses due to this settlement. Lenders also suffered a huge loss of Rs 16,222 crore.
Corporate Advisory Services Scheme
Another subsidiary of Reliance Capital, Reliance Corporate Advisory Services, was an SPV. It transferred funds to Anil Ambani’s group companies. This was done through 0% debentures and loans. Cobrapost found that Reliance Capital transferred Rs 1,400 crore through this entity.
The process was:
1. Reliance Capital gave loan to Reliance Corporate Advisory Services.
2. These funds then became loans or investments in different companies.
3. Funds came back to personally controlled companies.
4. ADA Group promoters got kickbacks in Anil Ambani’s companies. The Enforcement Directorate is currently investigating this.
The Rs 1,400 crore transaction was a “round-tripping” operation. It diverted funds and concealed fraud from regulators and auditors. Reliance Home Finance and Reliance Commercial Finance also gave loans worth Rs 288 crore to Vadwan Holdings. In return, the ADA Group companies received Rs 1,285 crore in seven promoter-controlled companies. These included Kubihari Developers and Edico Venture. These transactions were also round-tripping to hide suspicious transactions.
Many subsidiary companies of Reliance Capital which were involved are still operational. Big recovery is possible from the beneficiaries. However, the banks approached the National Company Law Tribunal instead of taking legal action against Anil Ambani and key people.
Cobrapost’s investigation also found suspicious foreign exchange transactions. Some companies of the ADA Group were involved in these activities since 2006. These transactions can be considered money laundering under the Prevention of Money Laundering Act. Some also violate FEMA (Foreign Exchange Management Act). About US$1.535 billion was transferred from these transactions to India. Today the amount is worth approximately Rs 13,047 crore. At the time, it was equivalent to about 40 rupees per US dollar.
Mysterious $750 million loan
Offshore companies and a detailed plan were used for this transfer. Cobrapost detected a large transaction worth US$750 million. This amount was a loan taken from a mysterious lender. Both the lender and the borrower disappeared. The money swung around several places and eventually ended up in a promoter company of ADA Group. This sounds like money laundering and tax evasion.
This transaction occurred as follows:
1. Mr. N.G. Darshan founded Reliance Projects PTE Limited in Singapore in 2006.
2. After a dispute, its custody was given to Reliance Innoventure.
3. Reliance Projects PTE Limited was renamed Emerging Market Investments and Trading PTE (EMITs). Its ownership rights went to Reliance Innovant Private Limited. It was then transferred to Emerging Markets Investment and Trading Unlimited (EMITU) in the British Virgin Islands.
4. In December 2007, NEX Exchange Capital loaned EMITs US$750 million. This loan was reportedly for Dadri Power Plant, which was never built.
5. All funds were invested in Compulsory Convertible Preference shares of A & Sons Enterprises Pvt Limited, a company of ADA Group. It took place on 17 December 2007.
6. The funds were then transferred to Facilities Solutions Pvt. Ltd. From there, they went to four more companies.
7. These four companies later merged with Reliance Innoventure, the holding company of ADA Group. This occurred in 2008-09 and 2009-10 so that evidence could be erased.
In this way, EMITs and those subsidiary companies that had transferred funds to Reliance Innoventure disappeared.
Singapore company and its disappearance
Two weeks after becoming Reliance ADA Group in 2006, Mr. N.G. Darshan registers Reliance Projects Pvt Ltd in Singapore. Its capital was US$1. ADA Group contacted this company and said they could not use the name “Reliance”. After negotiations, Darshan agreed to give custody of the shares and control of the company to Reliance Innoventure. This was a temporary agreement until the name was changed. The name was changed to Emerging Market Investments and Trading (EMITs) in November 2007.
A month later, however, Annie Exchange Capital loaned EMITs US$750 million. This happened despite Darshan’s advice against any activities in EMITs. EMITs transferred US$750 million to A & Sons Enterprises Pty Ltd. This was done through investment in Compulsory Convertible Preference shares. According to the exchange rate at that time, this total was Rs 2,951 crore. A&Sons Enterprises Pvt Ltd sent these funds as investments in four subsidiary companies of Reliance Innovature. All this happened on the same day. These four companies merged into Reliance Innoventure between 2008-09 and 2009-10. In this way the entire US$ 750 million disappeared. The companies used to transfer money also disappeared.
In June 2009, Pak Securities Corp advised Reliance Innoventure to transfer to Emerging Market Investment and Trading Unlimited (EMITU). This company was registered in the British Virgin Islands, which is a tax haven. This created more layers in the corporate structure.
External commercial borrowings and their misuse
Cobrapost found more cases of fund diversion. About US$575 million was diverted to India by Reliance Natural Resources Limited (RNRL) and Reliance Infrastructure. These funds were part of the US$660 million that was raised from abroad in the form of External Commercial Borrowings. This was in breach of FEMA rules. The money was invested in mutual funds, then sent to offshore companies, and finally written off.
This method was the same as the US$750 million diversion.
• In October 2006, Reliance Infrastructure diverted US$275 million of US$300 million of external commercial borrowings to India. • Funds went to Reliance Mutual Fund. He was later transferred to Reliance Natural Resources Singapore PTE Limited and written off.
• Reliance Infrastructure similarly diverted another tranche of US$300 million. This was among the US$360 million raised from external commercial borrowing.
• Funds were again placed in Reliance Mutual Fund. He was later sent to Gurrack Ventures in the British Virgin Islands. The remaining US$60 million also went directly to Gurrack Ventures.
• US$150 million from external commercial borrowing and diverted to India. This was for a desulfurization process in a power plant.
Dadri Power Plant fraud
In January 2004, Anil Ambani announced a 3,500 MW power plant in Dadri. Its estimated expenditure was Rs 10,000 crore. In 2006, RNRL took out a US$300 million loan for the plant. These were foreign currency convertible bonds. A further US$360 million was raised for the gas pipeline. This project never started.
However, ADA Group considered it an opportunity for another fraud. In October 2006, US$ 275 million of the loans taken came back to India. This money was invested in the liquid fund of Reliance Mutual Fund. This was clearly a violation of FEMA’s rules. The fund was then transferred to Reliance Natural Resources Singapore PTE Limited. It was a shell company. In 2018-19, the entire US$275 million transaction in Reliance Power books was written off. This Singapore company had no business, yet it received such a huge amount. There is a possibility of money laundering violation in this transaction. The Enforcement Directorate noted this but did not pursue the matter further.
In another case, Reliance Infrastructure diverted US$300 million to India in November 2006. The money was among the US$360 million raised for the Dadri Project. This fund was kept in Reliance Mutual Fund. In April 2007, this amount went to the Reliance Fixed Horizon Fund. Almost a year later, in March 2008, the fund moved to Gurac Ventures Ltd. Gurac Ventures is based in the British Virgin Islands. The remaining US$60 million also went directly to Gurrack Ventures. A total of US$ 360 million was diverted in this way. After the diversion, Gurrack Ventures changed its name several times. This fund was invested in preference shares of this BVI company. These shares were gradually written off. Reliance Infrastructure did not show BVI company as a subsidiary. This shows that they did not ensure proper utilization of external loans. This was in violation of FEMA’s rules and RBI’s guidelines.
Regulatory Monitoring And Light Punishments
ADA Group raised another US$150 million through external commercial borrowings. This came to light in 2008 when the group applied to the RBI to compound offences under FEMA. The company told RBI that the money was invested in its mutual funds due to delays in the project. When this application was pending, the company asked to withdraw it. She wanted to submit a new application with another tranche of US$150 million. The RBI rejected his explanation.
Under FEMA, the company could have been fined three times the sums involved. However, RBI adopted a soft stance. Instead of a fine of Rs 3,798 crore for suspicious foreign exchange transactions worth US$450 million, it asked Reliance Infrastructure to pay just Rs 124.68 crore as compounding fees. RBI did not question the source or end use of the fund. He also did not alert other agencies like the Enforcement Directorate. She also did not seek criminal prosecution. According to the RBI’s 2011 circular, they can refer cases to the Enforcement Directorate for further investigation if needed. Nevertheless, no such action was taken. More information about Cobrapost’s investigation can be found by visiting the Cobrapost website.
Cobrapost’s investigation has revealed a complex pattern of financial misconduct by Reliance ADA Group. This includes large-scale diversion of funds, money laundering and serious violations of financial laws. These works had a significant impact on public funds, banks and investors. Despite clear evidence of fraudulent activities, regulatory and law enforcement agencies have often relented.
The findings show how shell companies and multiple layers of transactions in complex schemes were used to hide fund flows. This led to misappropriation of billions of rupees and dollars. This situation calls for close monitoring and enforcement to protect the integrity of the financial system and hold powerful entities accountable.
Read Also:
In this article we have provided information about the Indian space programme. The information given…
In this article we have provided information about importance of technology. The information given here…
If you also use earphones or AirPods all the time, then be careful. Further let…
Youth lives not possible nowadays without gadgets. But if you use AirPods too long, it…
Most people consider music to be an important part of their day, which starts as…
In this article we have provided information about science and technology. The information given here…