Sahara bypassed norms to raise funds, SC told
The market regulator Securities & Exchange Board of India (SEBI) on Tuesday told the Supreme Court that the real estate arm of the Sahara group of companies had no right to mobilise Rs.27,000 crore from 30 million investors through debentures without complying with the regulatory regime.
The SEBI said the company raised the money through optional fully convertible debentures without complying with the regulatory regime of the stock market and listing on the bourses.
Senior counsel Arvind P. Datar, who appeared for the SEBI, told the apex court vacation bench of Justice K.S. Radhakrishnan and Justice J.S. Khehar that Sahara India Real Estate Corp. Ltd. (SIRECL) initially had every intention of going public but sought to camouflage it by saying that it did not intend to do so.
The other Sahara company involved in the case is Sahara Housing Investment Corp Ltd.
The court asked the Sahara firm’s counsel as to what was the material to show that it was not a public issue but a private placement.
Any company which made an private placement of shares or debentures to more than 49 people was treated as having made a public issue, and consequently was within the jurisdiction of the SEBI, Datar said.
Contending that the apex court should not disturb the Oct 18, 2011, order of the Securities Appellate Tribunal (SAT), Datar said that SIRECL had mopped up Rs.27,000 crore from 30 million investors and the entire amount was unsecured.
The balance sheet of the Sahara company did not inspire any confidence about the security of such a huge amount, he said.
The SAT directed SIRECL to refund the money to investors within six weeks along with 15 percent interest.
The apex court was told that of the Rs.19,400 crore raised by the companies, Rs.2,000 crore had been invested.
The senior counsel told the court that it would be “just and proper in the interest of justice” that the two Sahara companies be directed to refund all the amount that had been collected in violation of the statutory provisions governing the securities market.
The court was told that when SEBI followed up its query with SIRECL, it was told that the company had written to the corporate affairs minister and was awaiting a reply.
“The fact which needs more attention is that this massive mobilisation was made outside the well developed investor protection framework developed by the SEBI,” Datar said.
The senior counsel told the court that the prospectus filed by SIRECL was “false/misleading containing untrue statement”