Supreme Court orders Aamby Valley auction, summons Subrata Roy

Directs liquidator of Bombay High Court to prepare valuation in 10 days

The Supreme Court on Monday set in motion the process to sell Maharashtra-based luxury township of Aamby Valley to recover the dues owed by the Sahara Group to the Securities and Exchange Board of India (Sebi). 

The court, on the advice of amicus curiae Shekhar Naphade, appointed the official liquidator of the Bombay High Court as the agency responsible to value the 10,000-acre property and auction it. 

After Sebi counsel Arvind Datar raised doubts about various encumbrances, including the 999-year leases and some parts being sold during the pendency of the case, the Bench of Justices Dipak Misra, A K Sikri and Ranjan Gogoi asked the liquidator to prepare a valuation report and submit by April 27 — the date of the next hearing. 

The court also directed group chief Subrata Roy Sahara, who has been on parole since May last year, to be personally present on the date of the hearing. 

The case relates to two group firms — Sahara India Real Estate Corp (SIRECL) and Sahara Housing Invest Corporation (SHICL) — which had raised over Rs 24,029 crore from 29.6 million investors by issuing housing bonds. Sebi found this to be in violation of its public issue norms and ordered a refund in 2011. The order was upheld by the Supreme Court in 2012. Sebi says the total dues, with interest, exceed Rs 47,000 crore. Of this, the group has remitted Rs 11,477 crore as of February.

The court had set Monday as the deadline for payment of Rs 5,092 crore. But group counsel Salman Kurshid informed the court that it had appointed an agent who would receive expressions of interest for the overseas properties and that he expected the funds to come by May 24.

This delay led the Bench to take up the Aamby Valley sale.  

When Kurshid suggested that the shares of Aamby Valley might have been transferred to other entities and that the court’s action will be limited to the contemnors and shares held by them, Misra shot back saying, “Let us send him to jail.” Datar at this point referred to an earlier affidavit filed by the group, which had suggested to the court that the assets of Aamby Valley were enough to cover the entire dues owed to the investors. 

Misra told Kurshid, “We are absolutely sure the contemnor shall be guided by what he said on affidavit to the court and not play truant. He, who plays truant with the law of the land, shall suffer the wrath.” A ‘planned hill city’, Aamby Valley boasts a private airport, hospital and luxury resorts. It has received investments from various group entities at different points in time. While Sahara had told the court in 2012 that this was worth Rs 39,000 crore, on Monday, in a statement, it claimed the township was worth over Rs 1 lakh crore and should not be sold in distress. “Sahara is committed to making the payment of Rs 10,000-crore-plus by July/August 2017 but the Hon’ble court is instead asking for the auction of Aamby Valley. Since the last hearing, the court is insisting on the auction. The market valuation of Aamby Valley is above Rs 1 lakh crore. Auctioning under distress will give the bidder undue favour/benefit,” said Sahara lawyer Gautam Awasthi in an email.

In 2010, SIRECL and SHICL, the two entities which ran afoul of Sebi regulations, had invested Rs 6,700 crore in the shares and debentures of Aamby Valley, the company which owns the property. Subsequently, the firms told the Supreme Court they had sold these investments to Sahara Credit Cooperative Society and Sahara Q Shop. Company records showed that a month after being released from custody to attend his mother’s funeral in May, Roy had been appointed an additional director of Aamby Valley.

According to the latest shareholding pattern (December 2015), Sahara Q Shop Unique Products range was the largest shareholder with 43.12 per cent stake, followed by Sahara India Commercial Corp (25.42 per cent) and Subrata Roy (21.6 per cent). The move to sell Aamby Valley to raise funds had been vehemently resisted by the group in the past. It has said this would hamper its efforts to shore up resources for repayment. Separately, the court also ordered Chennai-based Prakash Swamy, the representative of New York-based MG Capital Holdings LLC, to be present for the hearing on April 27 and deposit Rs 10 crore towards cost. The court also directed a red corner notice to be issued against Swamy to ensure he doesn’t leave the country. 

The directions came after Swamy had, on behalf of MG Capital, originally expressed interest in acquiring the Sahara Group’s interests in the Plaza Hotel in New York for $550 million (Rs 3,700 crore). However, it did not pay up the amount of Rs 750 crore upfront. The court asked it to verify its credentials, citing the “cross-collaterised” nature of the Plaza holdings, which were linked to the Sahara Group’s interests in the UK.