Capital market regulator Securities and Exchange Board of India (Sebi) has banned former CEO of Religare Finvest Kavi Arora from the securities market for two years, which is in connection with a case of fund diversion. The market regulator has also imposed a fine of Rs 5 crore on Arora in this regard.
Arora has been banned from getting associated with the securities market, including as a director or Key Managerial Personnel in a listed company or a Sebi-registered intermediary.
The case lodged against Arora is related to Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises Ltd (REL). The case is in connection with the diversion of funds amounting to Rs 2,473.66 crore of Religare Finvest between 2014-15 and 2017-18.
As per the case, the money in the garb of loans was diverted through layers of entities for the ultimate benefits of entities controlled by the erstwhile promoters – Malvinder Mohan Singh and Shivinder Mohan Singh.
Ananta Barua, Sebi Whole Time Member, in the final order stated that Arora was “involved knee-deep in the perpetration of a scheme of diversion of funds”, a PTI report said. He said Arora served as CEO and MD of RFL from November 14, 2011, before his resignation in 2017.
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In his order, Barua said there is ample material on record to hold that Arora gave his consent to the approval of fresh loans under the Corporate Loan Book (CLB) and even the evergreening of certain loans under CLB, despite repeated and specific adverse comments by RBI, ICRA and some lending banks.
The financial statements of RFL were consolidated with the financial statements of REL on a quarterly basis. The diversion of funds was kept hidden from the shareholders of REL, which misled them to remain invested in the shares of Religare or deal in the securities of REL, Barua said.
The Sebi order said that the diversion of funds from RFL, in the garb of loans, led to indirect manipulation of the price of shares of REL. Thus, such an act was fraudulent and an unfair trade practice relating to the securities market.
By indulging in the scheme of diversion of funds along with the erstwhile promoters (Malvinder Mohan Singh and Shivinder Mohan Singh), Arora has also violated the provisions of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) rules, the order said.
Last year in July, Sebi passed a final order in the matter where it imposed a penalty of Rs 60 crore on 10 entities, including Malvinder Mohan Singh and Shivinder Mohan Singh (Singh brothers), in a case involving the diversion of funds of RFL.
The Singh brothers were also barred from the securities market for three years or until the recovery of the diverted money along with interest, while other entities were prohibited for two years.
(With PTI inputs)
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