In a major setback to the Sahara Group,the Supreme Court today directed two of its companies to refund around Rs 24,000 crore to their investors within three months with 15 per cent interest per annum.
In stinging observations against the companies for violating rules and regulations in raising funds from common investors,a bench of justices K S Radhakrishnan and J S Khehar said that such economic offences must be dealt with “iron hand”.
It said that if the companies–Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC)–fail to refund the amount then SEBI can attach properties and freeze bank accounts of the companies.
The Court also appointed one of its retired judges Justice B N Aggarwal to oversee the action taken by SEBI against the two Sahara firms.
“Saharas (SIRECL & SHICL) would refund the amounts collected through RHPs dated March 13,2008 and October 10,2009 along with interest @ 15% per annum to SEBI from the date of receipt of the subscription amount till the date of repayment,within a period of three months from today,” the bench said.
SIREC had collected Rs.19,400.87 Crs on March 13,2008 and SHICL had collected Rs 6,380.50 Crs. But the total balance on August 31 is Rs 24,029.73 Crs after premature redumption.
The group might have to fork out around Rs 38,000 crore as of now which includes Rs the principal amount of Rs 24,029.73 and interest of around Rs 14,000.
Taking into account the reluctance of the group in providing financial details including information about the investors,the bench said that the SEBI would probe into the issue.
It directed Saharas to furnish all documents in their custody to the regulator.
“Saharas are directed to furnish all documents in their custody,particularly,the application forms submitted by subscribers,the approval and allotment of bonds and all other documents to SEBI so as to enable it to ascertain the genuineness of the subscribers as well as the amounts deposited, within a period of ten days from the date of pronouncement of this order,” the bench said.
The bench said that civil and criminal liability should be imposed on the company for indulging in such economic offence.
“The provisions for imposing civil and criminal liability and refund of the amount with interest would indicate that,of late,economic offences in India like the one committed by Saharas be treated with an iron hand,or else we may land in another security market pandemonium,” the bench said.
It said that if the whereabouts of all or any of the subscribers is not found out then the amount collected from such subscribers will be appropriated to the Centre.
“SEBI shall take steps with the aid and assistance of Investigating Authorities/Experts in Finance and Accounts and other supporting staff to examine the documents produced by Saharas so as to ascertain their genuineness and after having ascertained the same,they shall identify subscribers who had invested the money on the basis of RHPs and refund the amount to them with interest,” the bench said.
“The consequence of the foregoing discussion,if correct,is alarming,shocking and distressing. When the appellant-companies are a part of the Sahara India Group of Companies,recognized in India with awe and admiration,their apparent attempt to withhold the disclosure of the factual position solicited by SEBI,cannot be brushed aside lightly,” the bench said.
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(Reuters) The Supreme Court on Friday ordered the Sahara conglomerate to refund more than $3 billion it had raised from millions of small investors,reaffirming an order from the capital markets regulator,which had said the process violated rules,in a blow to the powerful group.
The Supreme Court also ordered Sahara to pay 15 per cent interest to investors on their deposits,a lawyer on the case said.
Two unlisted group companies of Sahara,which has interests ranging from financial services and housing to media and sports,had between 2008 and 2011 raised a total of 177 billion rupees ($3.18 billion) from 22 million small investors through an instrument known as an optionally fully convertible debenture.
The Securities and Exchange Board of India last year ordered the group companies to refund the money,with 15 percent annual interest,after it found that the fund-raising process did not comply with rules.
An appellate tribunal upheld the regulator’s order after hearing Sahara’s appeal.
The apex court expressed surprised that Sahara was not maintaining records of the investors and said,”There was a pre-planned attempt to bypass the regulatory and administrative authority of the SEBI.”
“It seems the two firms collected money from investors,without any sense of responsibility to maintain records,pertaining to funds received.
“It is not easy to overlook that the financial transactions under reference are not akin to the transactions of a street hawker or a cigarette retailer made from a wooden cabin. The present controversy involves contributions which approximate Rs.40,000 crores,allegedly collected from the poor rural inhabitants of India,” the bench observed.
The bench dismissed Sahara’s contention that SEBI has no jurisdiction over it because it is not a listed company.
“SEBI,in the facts and circumstances of the case,has rightly claimed jurisdiction over the OFCDs issued by Saharas. Saharas have no right to collect Rs 27,000 crores from 3 crore investors without complying with any regulatory provisions contained in the Companies Act,SEBI Act,Rules and Regulations already discussed,” the bench said.
The court passed the order on a petition filed by Sahara group challenging SAT’s order to refund the amount to its investors.
SEBI in June 2011 had ordered the two firms to return the money collected from investors through financial instrument OFCD,after which the companies had approached the tribunal.
The stock market regulator had also restrained the two entities from accessing the securities market for raising funds till payments were made to the satisfaction of SEBI.
The two companies,their promoter Subrata Roy Sahara and directors Vandana Bhargava,Ravi Shankar Dubey and Ashok Roy Choudhary were told jointly and severally to refund the collected money by the regulator.