The filing of documents like the prospectus and information memorandum by Sahara India Real Estate Corp and Sahara Housing Investment Corp while issuing optionally fully convertible debentures (OFCDs) proves these were intended to be public issues, the counsel for Securities and Exchange Board of India (Sebi) said on Thursday.
Arvind P Datar, counsel for Sebi, told the Securities Appellate Tribunal (SAT) that these documents are not required for a private placement.
A private placement can be made to a maximum of 49 people. However, the two Sahara group firms, by their own admission, have 6.6 million investors. Sebi found these to be public issues as there were more than 50 investors and asked them to refund the money collected. Sahara appealed against the order in SAT.
The companies had argued they had expressly said in these documents that they did not intend to list the OFCDs on the stock exchanges and, therefore, Sebi did not have jurisdiction to regulate them.
Quoting the definition of ‘intention’ from the Sale of Goods Act, Datar argued that intention is to be inferred from circumstances, conduct of the parties and terms of the contract. He said the conduct of the parties showed they intended to issue it to the public. He also argued the intent to list should not be limited to literal interpretation, but should be interpreted contextually.
On the other contention of Sahara, that OFCDs were hybrids and did not come under the definition of securities, Datar said the term ‘securities’, as defined under the Securities Contracts Registration Act (SCRA), covered both equity and debt instruments and any combination of these. The hearing will resume on Monday. Darius J Khambatta, counsel for the ministry of corporate affairs will also make his statement on Monday.