The ADAG Probe's Next Chapter: How Many CEOs Must Be Arrested Before We Address Control?

The arrest of the former CEOs of Reliance Commercial Finance (RCFL) and Reliance Home Finance (RHFL) marks another significant escalation in the investigation into the alleged diversion of loans that reportedly caused losses of ₹7,623 crore to public sector banks. According to investigators, the case involves systematic diversion of funds through a network of entities and transactions that are now the subject of parallel scrutiny by the CBI and Enforcement Directorate.

Viewed in isolation, the arrests appear to demonstrate that enforcement agencies are finally pursuing accountability against those who occupied the highest executive offices in the lending entities.

Viewed in context, however, the development raises a different question.

How many chief executives, chief financial officers, managing directors and senior professionals must be arrested before the focus shifts from execution to control?

For nearly two decades, Indian corporate governance reforms have been built around a simple proposition: responsibility should correspond with authority. The greater the power to influence outcomes, the greater the responsibility for those outcomes.

That principle becomes difficult to reconcile with the recurring pattern seen in several large corporate fraud investigations.

Executives are arrested.

Bankers are arrested.

Independent intermediaries are questioned.

Professional managers face years of investigation.

Yet the central debate often remains unresolved: who ultimately benefited from the transactions and who exercised effective control over the ecosystem in which they occurred?

The RCFL-RHFL matter is particularly instructive because the individuals now facing scrutiny were not junior employees. These were chief executives and senior finance professionals occupying the apex of the operational hierarchy. They were responsible for implementing lending decisions, managing portfolios, interacting with lenders and ensuring compliance.

But chief executives do not own companies.

They do not control voting rights.

They do not determine promoter strategy.

They do not ultimately decide how promoter-controlled groups deploy capital across dozens of affiliated entities.

That distinction matters.

In corporate governance literature, there is a difference between "management responsibility" and "control responsibility."

Management responsibility relates to executing decisions, operating systems and implementing policies.

Control responsibility relates to the ability to direct outcomes, appoint leadership, influence strategic decisions and determine the allocation of capital across a group.

The latter is usually concentrated in promoters.

This is why the latest arrests should not be viewed merely as another law-enforcement milestone. They should be viewed as a test of whether India's investigative architecture can move beyond identifying operational actors and establish accountability throughout the chain of control.

To be clear, this is not an argument against prosecuting executives.

If evidence demonstrates wrongdoing, executives should face the consequences.

Indeed, accountability would be impossible if senior managers could hide behind the claim that they were "following orders."

The challenge is that the opposite proposition is equally dangerous.

Promoters cannot be allowed to claim ignorance whenever misconduct emerges inside businesses over which they exercise effective control.

A governance framework that prosecutes only executives creates a perverse incentive structure. Managers become the first line of liability while promoters become the beneficiaries of plausible deniability.

Such a model weakens accountability rather than strengthening it.

The recent arrests also expose a broader weakness in Indian banking supervision.

The alleged diversion of thousands of crores did not occur overnight. Such transactions require approvals, monitoring systems, audits, lender reviews, regulatory filings and repeated interactions with financial institutions. If investigators are correct, the alleged misconduct was not a single event but a process.

That raises uncomfortable questions for boards, auditors, credit committees and lending institutions that interacted with these entities for years.

The issue therefore extends beyond ADAG.

It concerns the architecture of accountability in Indian finance itself.

When a banking fraud occurs, who should bear primary responsibility?

The executive who signs the document?

The banker who approves the facility?

The auditor who certifies compliance?

The board that oversees governance?

Or the controlling shareholder who ultimately exercises influence over the enterprise?

The answer, of course, is all of the above.

Modern corporate failures are rarely the product of a single individual. They emerge from systems, incentives and concentrations of power.

The arrests of former RCFL and RHFL CEOs may therefore represent progress.

But they should not become the end of the story.

The real measure of success will not be the number of executives arrested.

It will be whether investigators can establish a coherent chain of accountability connecting decisions, beneficiaries, governance failures and ultimate control.

Until then, India risks continuing a pattern in which enforcement successfully identifies the hands that executed transactions while leaving unresolved the more important question of who controlled the machinery behind them.

And in corporate governance, control is where responsibility ultimately begins.