Kavi Arora vs SEBI - The Case
Kavi Arora served as the MD and CEO of Religare Finvest Ltd. from November 14, 2011. He then resigned from the company in 2017.
The Securities and Exchange Board of India (SEBI) has banned Kavi Arora from the securities market for 2 years and has also imposed a fine of ₹5 Crore on him in connection with a case of fund diversion.
The case is related to the diversion of ₹2,473.66 Crore of Religare Finvest Ltd. from the financial year 2014-2015 to 2017-2018.
These funds were diverted in the garb of loans through multiple entities, for the benefit of entities controlled by former promoters Malvinder Mohan Singh and Shivinder Mohan Singh.
In the 128-page final case order on March 16, 2023, Ananta Barua, SEBI Whole Time Member, said that Kavi Arora was extensively involved in the diversion of funds, which took place from the financial year 2014-2015 to 2017-2018.
Barua noted that there is ample evidence to hold that, despite repeated and specific adverse comments by the RBI, ICRA and some lending banks, Kavi Arora gave his consent to approve fresh loans under the corporate loan book (CLB) and even the evergreening of certain loans under CLB.
Ananta Barua added that the financial statements of RFL, which is a subsidiary of Religare Enterprises Ltd. (REL), were consolidated with the financial statements of REL on a quarterly basis.
“The diversion of funds was never disclosed to the shareholders of Religare Enterprise, which mislead them to remain invested in the shares of Religare or deal in the securities of Religare Enterprise," Barua said.
The diversion of funds from RFL led to indirect manipulation of the REL share price. Arora has also violated the provisions of the Prohibition of Fraudulent and Unfair Trade Practices rules by indulging in the diversion of funds along with the former promoters.
As a consequence of these violations, Arora is banned from accessing the securities market and from trading or dealing in securities, directly or indirectly, for 2 years.
The SEBI has also imposed a fine of ₹5 Crore on Arora.