 "SC raps Sahara for mockery of its order")
The Supreme Court on Wednesday made strong observations against the Sahara group after the Securities and Exchange Board of India (Sebi) said it was not satisfied with the documents given by the group.
The observations came in a contempt case filed by Sebi against Sahara India Real Estate and Sahara Housing Invest, which allegedly have not complied with the Supreme Court’s August 2012 order to refund the Rs 24,029 crore they raised by issuing optionally fully-convertible debentures (OFCD). Sahara, which paid Rs 5,120 crore to Sebi, claims it has refunded the rest directly to investors.
Last month, the apex court had directed the Lucknow-based group to file original title deeds of Rs 20,000-crore properties to cover its dues. In compliance with this order, Sahara filed two sets of documents with the market regulator. One pertained to a land parcel in Versova in Northwest Mumbai and the second to land holdings in Vasai, outside Maharashtra’s capital.
Pointing out that the valuer had ascribed the valuation on the basis of proposed developments, he said that in the two Sahara firms had, in a January 2012 affidavit, valued the same property more conservatively. “The two companies said they owned a third of this property and it was worth Rs 1,800 crore.”
The objections evoked strong remarks from judge K S Radhakrishnan, who said: “This cannot be accepted. If this is the manner you are complying, it is a mockery of the order.”
The court adjourned the matter until Thursday, as Sahara counsel C A Sundaram was indisposed and could not be present for the hearing. Sundaram had proposed the alternative arrangement of submitting documents in lieu of depositing the entire sum in cash. The court decided to hear his arguments on Thursday before passing any directions.
At present, the Versova land is said to contain “thick vegetation” with boundaries “marked by creeks”.
Datar also pointed out that the valuer had given disclaimers saying it had not examined the site, location, etc. He also said the documents were not accompanied by a “no encumbrance” certificate, as required by the court.
In valuing the Versova property, Sahara’s valuer is said to have used a discounted method, where the valuation of a township proposed to be completed by Sahara in 2021 was first arrived at and then this was discounted to the present value.
Explaining the method to the court, Datar said: “Let us say there is an acre of land that is worth Rs 1 crore. They have got the valuer to say that 500 flats can be built on this one acre and each flat will be worth Rs 50 lakh, and so on.”
Such methods of land bank valuation had been frowned upon by the regulator in the past, when top realty companies approached to float their public offerings.
The observations came in a contempt case filed by Sebi against Sahara India Real Estate and Sahara Housing Invest, which allegedly have not complied with the Supreme Court’s August 2012 order to refund the Rs 24,029 crore they raised by issuing optionally fully-convertible debentures (OFCD). Sahara, which paid Rs 5,120 crore to Sebi, claims it has refunded the rest directly to investors.
Last month, the apex court had directed the Lucknow-based group to file original title deeds of Rs 20,000-crore properties to cover its dues. In compliance with this order, Sahara filed two sets of documents with the market regulator. One pertained to a land parcel in Versova in Northwest Mumbai and the second to land holdings in Vasai, outside Maharashtra’s capital.
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Sebi found discrepancies in both sets. Its counsel Arvind Datar raised objections, saying the first set, pertaining to the 106-acre land parcel in Versova, was disproportionately overvalued, at over Rs 19,000 crore. “The property was registered in the name of Sahara India after a consent decree from the Bombay High Court, where there were 16 or 17 defendants. The property is worth Rs 118 crore after 30 per cent statutory abatement according to the title deed.”
Pointing out that the valuer had ascribed the valuation on the basis of proposed developments, he said that in the two Sahara firms had, in a January 2012 affidavit, valued the same property more conservatively. “The two companies said they owned a third of this property and it was worth Rs 1,800 crore.”
The objections evoked strong remarks from judge K S Radhakrishnan, who said: “This cannot be accepted. If this is the manner you are complying, it is a mockery of the order.”
The court adjourned the matter until Thursday, as Sahara counsel C A Sundaram was indisposed and could not be present for the hearing. Sundaram had proposed the alternative arrangement of submitting documents in lieu of depositing the entire sum in cash. The court decided to hear his arguments on Thursday before passing any directions.
At present, the Versova land is said to contain “thick vegetation” with boundaries “marked by creeks”.
Datar also pointed out that the valuer had given disclaimers saying it had not examined the site, location, etc. He also said the documents were not accompanied by a “no encumbrance” certificate, as required by the court.
In valuing the Versova property, Sahara’s valuer is said to have used a discounted method, where the valuation of a township proposed to be completed by Sahara in 2021 was first arrived at and then this was discounted to the present value.
Explaining the method to the court, Datar said: “Let us say there is an acre of land that is worth Rs 1 crore. They have got the valuer to say that 500 flats can be built on this one acre and each flat will be worth Rs 50 lakh, and so on.”
Such methods of land bank valuation had been frowned upon by the regulator in the past, when top realty companies approached to float their public offerings.