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Dinesh Narayanan

Mumbai , Jan. 6

WHILE a debate currently rages in the media over the complex web of investments by affiliates of the Reliance Group, the phenomenon has drawn adverse notice from an inspection team of the Reserve Bank of India (RBI) as far back as 10 years ago.

As early as in 1995, the Reserve Bank of India had done a snap scrutiny of the investment and trading activities in shares and debentures of satellite companies of the Reliance group. Two RBI inspectors had probed seven companies and they had recommended inspection of another 215. They suggested that RBI's own Department of Supervision, the Income Tax Department, the Securities and Exchange Board of India and the Department of Company Affairs check from various angles of regulatory compliance the transactions put through by these these companies.

In their limited enquiry, the two inspectors had discovered complex equity holding patterns, huge inter-corporate deposits raised by companies with meagre capital prompting them to raise questions of possible diversion of bank funds, public money and even money raised from euro issues by flagships companies within the group. Most of these companies operated from a single address at Nariman Point in Mumbai. The report, a copy of which is with Business Line, says that Mr Vinod Ambani, who is the Company Secretary of Reliance Industries, looked after the operations of these satellites.

The report clearly states that many of the companies had violated RBI rules and guidelines. It has detailed the nature of violations and amounts received by various companies.

"Apart from the fact that Shri Vinod Ambani, the company secretary of RIL was in-charge of the operations of all the satellite companies housed at Mittal Court, he was a director of one of the satellite companies inspected by us viz. Fidelity Shares and Securities Ltd. A few of the other employees of the major Reliance Group functioning as the directors of the satellite companies could not be ruled out," the report says. Transactions in the shares of RIL and other group companies by these outfits, the report has contended, smacked of trading by an `insider'. It has recommended referring the matter to SEBI and other appropriate authorities for "information and necessary action, if any" .

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