 Hello and welcome to NewsClick. This week we again talk about Anil Ambani because he has been in the news. A couple of days ago, 20th February to be precise, the Supreme Court held him guilty of contempt of court and willful disobedience of his orders. Now that was a bombshell because for the first time ever the highest court in the country had indicted an Ambani and asked him to pay 253 crores to Ericsson India which dragged him to court for failure to pay. With interest, not only that, if that money is not paid in four weeks, then Mr Ambani, that is Anil Ambani and a couple of other directors stand to face at least a few months in jail. This hasn't happened before. It sent shock waves through industry, through investors, through big news for the day and it has triggered a whole bunch of issues which we had taken up in the week before. So let's look at what happened. So one of the first things that happened of course was the inevitable fall in reliance group share prices and do you remember that a week ago I talked about how nine lenders had got together to enter into what they call a standstill agreement where they irregularly agreed not to sell the shares until September 2019. Now we'll discuss that a little later but clearly after the Supreme Court order things had changed for reliance at least the Anil Ambani, Anil Derubai Ambani group or what is called ADAG. Now ADAG has been in trouble several times before. Each time it has got away by paying some kind of penalty without admitting or denying guilt. It had paid 50 crores to Sebi in the past. It has recently settled another case for 65 lakhs and this is not the only one. There have been problems with insurance. There have been other settlements with RBI but the message to the world was that Ambani's don't get punished. The Supreme Court changed all of it. To his credit Mr. Anil Ambani who had been on a suing spree and trying to stop people from writing about him has got cracking. So one of the first announcements that he made is that he is going to sell his 42 percent plus stake in the asset management company which is one of its biggest assets. So reliance capital will sell over 42 percent to Nippon insurance asset management. Now this sale the news of this sale caused all Ambani group ADAG group prices to soar. In fact the asset management company hit the upper circuit and rose 20 percent two days in a row. This in itself is a very sad indictment of Mr. Anil Ambani and his business prowess. But the good news to a whole lot of people one of them be these nine lenders who entered into a standstill agreement. Now you may remember that we discussed last year last week about how Adelweiss had sold shares and Anil Ambani had dragged them to the Bombay High Court. The Bombay High Court also had refused to listen and said that the lender did well in selling the shares when it needed to. The case still goes on. What has happened here is that the Reserve Bank of India seems to have woken up. So what we learn from the newspapers today is that the RBI has written to the lenders asking questions. At the moment it's only questions. But it also seems to be clear that standstill agreements are irregular and are seemingly a violation of the RBI's policy on loan against shares. Because it's very clear that when you lend to a company against shares you have a collateral. You have a bit of margin. If the stock price falls you're supposed to sell and you're supposed to protect yourself. Each of these finance companies and mutual funds to be nine of them who had lent to the ADAG group have a whole bunch of investors that they are countable to. So it's not their choice. They cannot enter into agreements. They cannot claim that this is being done to protect investors because it goes against the rules. But they have gotten away with it by pretending both in the Anil Ambani case or ADAG case as well as the Z Group that it is to help investors and prevent a fall in prices. Now they've got really lucky with the Supreme Court judgment and the decision to sell the asset management company because all stock prices have soared. So they don't have to worry anymore about collateral. But the standstill agreements remain a question. Not only is the RBI looking at it but the securities and exchange board of India has also woken up A to the realization that people have not even been disclosing, mutual funds have not even been disclosing what kind of loans they have given. And this is maybe as high industry wise is 50,000 crore. And what SEBI has discovered is that they structured instruments in a manner that disclosures were not required. And the fact that there was a pledge of shares was hidden and did not have to be reported to the stock exchanges. One of the things again one hears is that SEBI intends to make this a direct pledge. Mutual funds will be told that they can no longer come up with fancy little instruments that help hide things from the public domain and go completely against the disclosure based policy or regulation that India has opted for. Unfortunately everything that RBI and SEBI are doing is coming out in the public domain in the form of media leaks. This hardly instills confidence. Luckily the media is still credible and we believe that there is truth behind it. But actually the regulators should have led from the front, should have come out in the open and should have talked about it. Because the extent of pledge in the Ambani case is really serious. I have got some numbers over here but it shows that the ADAG group has pledged anywhere between 85 to 95 percent of its shares in every valuable company that it holds and some of them not even very valuable. Which means that you have a very fundamental question here. Do they even have the right to be in charge of management? That brings me to an issue that I took up with the SEBI chairman, which is this whole business of what is fit, who is fit and proper. Now ironically the person who is fit and proper issue is Anil Ambani's ADAG group itself. So they wrote a letter, I think it was on 11th February to SEBI. This was done when Adelweiss group sold its Reliance Power shares. So ADAG was so livid that they wrote to SEBI and said that this group should be declared. Not only should there be an investigation, they have gone to court saying that Adelweiss needs to buy back the shares that was sold but it wanted SEBI to declare the whole Adelweiss group which is big in finance as not being fit and proper. So now my question is quite simple. After Supreme Court indictment based on the past history is the ADAG management fit and proper? Especially to be in a bunch of finance companies they are in home finance, Reliance Capitalism finance and they are an insurance where they are handling large amounts of public money. Most of these companies are listed. The regulators, RBI and SEBI have a clear rule and criteria which they have used in the past to throw out some other people from the capital market. So why will that not be invoked here and again like I said ironically this is an issue that has been raised by the ADAG group itself. Our problem in India is that our regulators are allowed to remain mute and not speak out even though it is a matter that affects lakhs of investors. So we will wait and watch. It will probably take months and months before they investigate and they come up with something. But there is one piece of good news. The Supreme Court case and the indictment of Mr. Anil Ambani has ensured, probably ensured I should say let me not be so sure that it has ensured. It has probably ensured that our regulators will be a lot bolder in dealing with this group in the days to come. Thank you.