Delivering a stinging rebuke, the Supreme Court on Friday ordered the Sahara Group to pay back as much as Rs25,000 crore to investors within three months, after “illegally” collecting Rs17,400 crore deposits through a “dubious” issue of optionally fully convertible debentures from 22 lakh investors.
The court said all investors should be paid interest @15% per annum.
Since the money was collected between March 13, 2008, and October 16, 2009, about three years of interest would have to be paid at least, amounting to Rs7,800 crore.
The order essentially upholds an earlier one by KM Abraham, a wholetime member of the Securities and Exchange Board of India (Sebi), on June 23, 2011, whereby, the two group companies involved — Sahara Commodity Services (formerly known as Sahara India Real Estate Corporation) and Sahara Housing Investment Corporation — were directed to refund the monies to investors with interest.
Sebi had then banned promoter Subrata Roy and Sahara directors Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary from accessing the capital markets.
Describing the money-mopping operation as illegal and in defiance of law, a bench of justices KS Radhakrishnan and Jagdish Singh Khehar, in a 300-page verdict, expressed anguish and observed: “It is not easy to overlook that the financial transactions under reference are not akin to transactions of a street hawker or a cigarette retailer made from a wooden cabin”.
The rare judgment emphasises the rights of investors and Sebi.
The court also appointed a former top court judge BN Agrawal to supervise the entire refund operations. It said Agrawal would be paid Rs5 lakh per month as salary and his various allowances would be met by Sebi but recovered from Sahara.
The court also asked Sebi to screen the list of investors and if it is found that some of them are missing, the money shown in their names would be deposited with the Government of India.
“This could also open a can of worms since some of the monies could belong to politicians,” said an analyst. “A lot of the names could be fake too.”
The companies had, through its 10 lakh agents and 2,900 branches, collected the money violating provisions of the Companies Act, 1956, and Sebi regulations.
The SC said since Sahara denied vital information to Sebi saying the records were not available or at time the regulator had been told not to start the inquiry then as companies’ staff members were on summer holidays with their families and children.
One wonders whether Sahara was “running a kindergarten, where their staff were expected to be unavailable during the summer”, the top court observed, and said the impression which the companies’ communication projected was “that the two companies had no respect whatsoever for Sebi”.
In a separate but concurring 36-page judgment, justice Khehar said, “despite restraint, one is compelled to record, that the whole affair seems to be doubtful, dubious and questionable. Money transactions are not expected to be casual, certainly not in the manner expressed by the two companies”.
While Sahara had argued the fundraising was a private placement not governed by rules for public issues, Sebi had said it violated rules because a private placement should be limited to a maximum of 49 investors.
Founded by Subrata Roy, Sahara sponsors India’s cricket team, the field-hockey team and owns a stake in Formula One auto racing team Force India.
Owning London’s Governor House Hotel, the company has also agreed to buy a controlling stake in New York’s landmark Plaza Hotel for $570 million.
Source: www.dnaindia.com
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