SEBI Imposes Rs 8 Lakh Penalty On Reliance Home Finance For Disclosure Violations

The Securities and Exchange Board of India (SEBI) imposed a penalty of Rs. 8 lakh on Reliance Home Finance Limited (RHFL) for violations related to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). The violations pertain to the company's failure to disclose material events and delays in disclosing crucial information as required under the LODR Regulations.

The matter pertained to an order from the National Company Law Tribunal (NCLT) on June 21, 2021, which directed RHFL to pay interest on its secured non-convertible debentures (NCDs) at the contractual rate within two months and to redeem the debentures by paying the principal amount within three months. The total amount due was over Rs 2,850 crore. This order necessitated prompt disclosure to the stock exchanges as per SEBI's regulations.

Despite the critical nature of the order, RHFL did not disclose it within the required 24-hour timeframe, nor did it disclose subsequent appeals filed by RHFL and the Bank of Baroda against the NCLT order. SEBI found that RHFL also delayed disclosing other important information related to its debt resolution plan

SEBI's finding:

1. RHFL did not disclose the NCLT's order directing the company to pay interest and redeem the debentures. This omission violated regulations requiring timely disclosure of material events that could affect investor decisions.
2. RHFL and the Bank of Baroda had filed appeals against the NCLT order. RHFL failed to disclose these appeals promptly.
3. The company was required to disclose the invitation of Expression of Interest (EoI) bids for its debt resolution plan by July 30, 2020, but did so only on July 31, 2020. Similarly, the approval of the resolution plan by lenders was disclosed a day late, on June 21, 2021, instead of the required date of June 20, 2021.

The LODR Regulations mandate that listed companies disclose material events to ensure transparency and protect investor interests. Specifically, Regulation 30(1) requires the disclosure of events deemed material by the company's board, and Regulation 30(6) mandates that these disclosures be made within 24 hours of the event. Failure to comply with these regulations can result in penalties under Section 15A(b) of the SEBI Act, 1992.

RHFL argued that it had substantially complied with the disclosure requirements by including the NCLT order and appeals in its annual report and that the information was publicly available through various media channels. The company also contended that the delays in disclosing the debt resolution plan were minor and did not impact investors, stating the severe impact of the COVID-19 pandemic on its operations as a mitigating factor.

However, SEBI rejected these defenses and held that the primary obligation is for the company itself to make disclosures directly to the stock exchanges in a timely manner, irrespective of whether the information is available through other channels. SEBI's adjudicating officer noted that the cumulative effect of these lapses, despite being minor in individual instances, undermined regulatory compliance and transparency.

Consequently, SEBI imposed a penalty of ₹8,00,000 under Section 15A(b) of the SEBI Act, 1992 on RHFL.

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