Sahara awaits court to defreeze accounts

The new bench comprising of Justice TS Thakur and Justice AK Sikri is to continue the hearing of Sahara – SEBI case today. Sahara group is waiting for the embargo to be lifted from its properties and bank accounts to secure the release of its Chairman Subrata Roy Sahara and two directors.

Sahara is required to pay 5,000 crore rupees in cash and 5,000 crore rupees by way of bank guarantees to bail out its Chairman Subrata Roy and two directors. Sahara’s bank accounts and properties are currently under Court’s embargo and SEBI’s seizure since November 2013 and its Chairman and two directors under judicial custody for around 90 days now. The conglomerate in the last 3 months has expressed its inability to generate money for the bail under these circumstances.

While Sahara is paying the amount as per the orders of the court, its lawyers have always maintained that Sahara has already refunded money to 93% of its OFCD investors, majorly way back between May’12 and September’12. In addition to this, the remaining amount along with buffer has been deposited with SEBI in August 2012 but in the last 20 months, SEBI has been able to repay only one crore rupees to investors. The amount of more than Rs. 5,600 crore is lying with SEBI along with 

However, despite having paid of the money, Sahara is willing to deposit 10,000 crore rupees to honour the apex court’s order. The demand of 20,000 crore rupees plus interest to be paid to SEBI as ordered by the court is not for even one single payment due of any investor and Sahara will end up paying money twice to the same liability. The situation would be precarious for any financial institution.

While the money might eventually return to Sahara after verification process is completed, the cost in terms of interest payment and other guarantees will be humungous that any corporate can ill afford to pay, observes Arun Kejriwal, Investment Advisor.

The Sahara – SEBI case, which eventually was of the jurisdiction issue on the OFCDs issued by two Sahara companies in 2008-09. Sahara has earlier also issued OFCDs in 2001 with the permission of Registrar of Company (ROC), under company law board in the Ministry of Corporate Affairs and filed return of 1.98 crores of investors of OFCD in 2006. In 2008-2009 also it issued OFCDs for Sahara India Real Estate Corporation Limited (SIRECL) and for Sahara Housing Investment Corporation Limited (SHICL) under the permission of RoC Kanpur and RoC Maharashtra, respectively. Sahara has submitted Balance Sheets and Returns, etc. to the Registrar of Companies and the latter has regularly inspected the issue, there was no objection to the same from SEBI and any other Government body till then.

Even on 21st April 2010, SEBI wrote to Regional Director (controlling office of Registrar of Companies) that 'these two OFCD companies - SIRECL and SHICL are unlisted so they do not come under SEBI's jurisdiction, so you are requested for necessary action'.

SEBI had then said in Parliament in July 2010 as well that since the companies were unlisted, money raised through OFCDs did not come under its jurisdiction.
However, within a few months, SEBI changed its stance and told the Lucknow Bench of Allahabad High Court that the two companies - SIRECL and SHICL which issued OFCD in 2008-09 – were under SEBI's purview and not under the jurisdiction of the Regional Director or the Ministry of Corporate Affairs or the Registrar of Companies.
Sahara’s stance has been backed by a number of legal luminaries including then Law Minister, Veerappa Moily, Present Solicitor General, Mohan Parasaran, Additional Solicitor

General, Ashok Nigam and former Chief Justice of Supreme Court - Justice V.N. Khare.

SEBI claims that Sahara did not take permission for it as the issue involved fund raising from over 50 investors, while the ordinance introducing the cap of 50 on investors came as late as in April 2011 while the money was mobilized in 2008-09. It is indeed shocking that Sahara has been punished by a law that is being applied in a retrospective manner.