Reliance loan fraud: Ex-execs Jhunjhunwala, Bapna in ED custody

The Rouse Avenue court on Thursday remanded two former Reliance (ADAG) group companies' senior executives, Amitabh Jhunjhunwala and Amit Bapna, in ED custody. They have been arrested in Reliance Home Finance Limited (RHFL) and Reliance Commercial Finance Limited (RCFL) in an alleged bank loan fraud and money laundering case registered by the Enforcement Directorate (ED).

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Special Judge Hasan Anzar granted custody of both Accused to ED for 5 days. The ED had sought 7 days' custody of both accused to interrogate them in the money laundering case. The court has allowed lawyers to meet the Accused persons for 45 minutes and family members for 15 minutes in ED Custody. The accsued were arrested by the ED yesterday and produced before the judge at his residence at midnight, and the hearing went on till morning, 5 AM. Thereafter, the accused were again produced before the judge in the Rouse Avenue court.

Advocate Vijay Agarwal appeared for Amit Bapna. Advocate Sowjanya Sankaran appeared for Amit Jhunjhunwala.

Court's Rationale for Custody

While granting custody, the court said that the case is at a very initial stage and the exact role of each and every person is required to be determined, whether the accused persons had acted in concert with each other. "The available material on record indicates that there is an imminent possibility of involving some other persons, and the entire money trail of about Rs 11,500 Crores is required to be traced so that proceeds of crime are recovered," the court said in the order. The court noted that the accused persons are required to be confronted with the documents, and the entire gamut of the complex transaction is required to be unveiled during the course of the investigation. "In view of the above-mentioned discussion and taking into consideration the totality of the facts and circumstances, five days' Custodial Remand is granted to the Enforcement Directorate and the accused shall be produced before the concerned Court on 20.04.2026," Special Judge Hasan Anzar ordered on April 16.

ED's Allegations of a Pre-Planned Scheme

While seeking 7 days custody the ED contended that investigation conducted so far has revealed a pre-conceived and well planned scheme to divert/siphon off of public money from Reliance Home Finance Ltd and Reliance Commercial Finance Ltd. through various shell/paper companies which were operated and controlled by Reliance Anil Ambani Group under the pretext of Corporate Loans by cheating banks, share holders, investors and other public institutions.

Focus on Reliance Home Finance Ltd (RHFL)

It was also contended that during the period of 2015 to 2020, the "company received funds to the tune of Rs. 35,368.97 crore, and it was also revealed from the book of accounts of RHFL for the year 2018-19 that the company was indebted to Rs 12,728.89 crore." It was also revealed during the investigation that during the Financial Year 2018-19, 80 per cent of the disbursement made by RHFL was for non-housing purposes, the ED said.

It contended that when "RHFL defaulted in debt repayment obligation/financial/investors and an inter-creditor agreement was executed on 06.07.2019 to formulate and implement a debt resolution plan in accordance with the directions of the Reserve Bank of India (RBI)." During the ED investigation, it is revealed that "33 banks have provided credit facilities in the form of term loans, cash credit, etc and certain recoveries were also made by the Bank."

It contended that to date, "Reliance House Finance Ltd had committed a default of 7523.46 Crores and the lender/investors were able to recover only 2116.28 Crores after resolution and therefore, the balance amount of Rs. 5407.18 Crores constitutes the proceeds of the crime." The ED also contended that during the investigation, it was revealed that various shell companies belonging to one Pradeep had a cross-shareholding structure among themselves.

"It is also revealed that the paper companies were having weak financial and no active business operation, minimal revenue from operation, negative flow, etc and the Directors of these entities were employees or associates of Reliance Anil Ambani Group, and these paper companies were under the control of Reliance Anil Ambani Group," ED stated The ED further contended that the investigation so far has revealed that paper companies were used as channel to divert/siphon off funds from RHFL through a complex web of transactions.

It was also contended that various loans, like General Purpose Corporate Loan, were disbursed in blatant disregard of Prudential Lending Norms, and the instructions of the same were given by the management of the parent company of RHFL, i.e.Reliance Capital Ltd. It is also revealed that credit appraisal memos revealed that no field visit/personal due diligence or the financial capacity of borrowers were analyzed and the loan approval process was granted without involvement of a formal credit committee meeting, and signatures were subsequently obtained or procured, the ED said. The ED also contended that about 90 per cent of the Corporate Loan was disbursed to the shell/paper companies operated and controlled by the Reliance Anil Ambani Group. It is also contended that loans were basically advanced to 98 Different Loan Accounts of 45 different entities.

Investigation into Reliance Commercial Finance Ltd (RCFL)

The ED said that the investigation with respect to M/s Reliance Commercial Finance Ltd. (RCFL) would reveal that it is registered as a Non-Banking Financial Corporation (NBFC). It is further contended that the commercial finance business was de-merged and the said company used to offer a wide range of products, including SME Loans, Micro Finance, Infrastructure, Car Loans and Personal Loans, etc. It is further contended that, as per the meeting of the Board of Directors, the loan proposals above Rs. 5 Crores were required to be approved by the Credit Committee of RCFL.

It is further contended that perusal of the book of accounts of RCFL and other records for the period 2015-2016 to 2020-2021 would reveal that it has raised funds of Rs. 113424 Crores, and it was also found that it was indebted for the financial year of 2018-19 of Rs. 10518.5 Crores. The ED also contended that since RCFL began defaulting, the lenders/investors of RCFL entered into an inter-creditor agreement on 06.07.2019 and formulated a debt resolution plan in accordance with the guidelines of the Reserve Bank of India (RBI) and the consortium of banks was led by Bank of Baroda.

It was submitted that "RCFL was later on acquired Authum Investment and Infrastructure Ltd, and thereafter, RCFL became a subsidiary of AIIL." It was further contended that "out of the total default of 822.47 Crores, the lender/investors were able to recover Rs 1947.99 Crores, and thereafter the balance amount of Rs 6280.47 Crores remains uncovered and constitutes the proceeds of crime in the case of RCFL."

The ED investigating further revealed that funds were diverted through 36 Shell/Paper Companies, and these companies were basically used as a channel to divert/siphon off funds from RCFL. "It is also contended that Pradeep Ratilal Shroof has allowed his companies to use as a financial conduit, and it is further contended that RCFL diverted public money to the shell entities as corporate loans in blatant disregard of prudential lending norms." It is also contended that "instructions for giving corporate loans were given by the top management of RCAP, the parent company of RCFL." It is therefore contended that "the loan amount of Rs. 7408.70 Crores was disbursed to 36 Shell Companies as Corporate Loans through 78 different loans, and the amount constitutes about 82.96% of the amount disbursed."

Alleged Role of Amitabh Jhunjhunwala

With respect to the role of accused Amitabh Jhunjhunwala, ED submitted that the accused was Director of Reliance Capital Ltd, holding company of RHFL and RCFL from March, 2003 to September, 2019. It is also contended that the "accused was also Vice Chairman of RCAP from March 2006 to September 2019, and as such, he had full control over the affairs and management of RCAP Group of Companies, including RHFL, RCFL and was the key decision maker with respect to various operations of companies, such as raising of funds, monitoring cash flows, etc."

It is also contended that the control of Amitabh Jhunjhunwala is evident from various electronic evidence as well as the statement of Ravindra Sudhakar, CEO and Director of RHFL. It is also contended that the "accused Amitabh Jhunjhunwala took crucial decisions with respect to the disbursement of funds from RHFL & RCFL to different shell/paper entities operated and controlled by the Reliance Anil Ambani Group, and there is electronic evidence in the form of emails, etc."

It is also contended that as per statutory authorities such as RBI, NHB, etc, that an "NBFC could lend upto a maximum of 25% to its net-worth to group companies and upto 15% of its net-worth to any single company and such transactions are required to be disclosed at financial statement as part of related party transactions which could have been subjected to enhance scrutiny by audit company/Board of Directors as well as stake holders of both RHFL and RCFL." It is also alleged that "Amitabh Jhunjhunwala, in connivance with Amit Bapna and others, had diverted funds from RHFL and RCFL under the guise of corporate loans to various companies, which are essentially controlled by the Reliance Anil Ambani Group of companies."

Alleged Role of Amit Bapna

The ED contended that Amit Bapna is a key managerial person of Reliance Capital Ltd, the parent company of RHFL and RCFL. It is further contended that the accused used to give instructions/directions to CRO, CEO and Director of RHFL and RCFL for sanctioning of corporate loans to shell/paper companies. It is also contended that the "accused used exercise control over both RHFL and RCFL.

It is also contended that the accused had resigned from the post of Reliance Capital Group as CFO and COO in August 2020." The ED also contended that the "accused Amit Bapna took up employment with Assar Sports till March, 2025 and pursuant to the registrations of FIRs on 23.01.2025, the accused is employed with PTMBL Jakarta, Indonesia." It was also contended that the "necessity to arrest the accused in the present case is to investigate and ascertain the role and involvement of other persons, and to identify beneficiaries and trace the end utilisation of proceeds of the crime and to unearth the larger conspiracy." (ANI)