The Ministry of Corporate Affairs (MCA) has said it will not be party to the ongoing dispute between Sahara Group of companies and market regulator, the Securities and Exchange Board of India (Sebi).
In a clarification issued on Saturday, MCA pointed out that it had mandated its field offices on November 22, 2010 to carefully scrutinise offer documents filed by Unlisted Public Companies proposing to raise money through the private placement route to check misuse of private placement provisions under the Companies Act, 1956.
Without elaborating on the outcome of the scrutiny, MCA said that it will substitute Unlisted Public Companies (Preferential Allotment) Rules, 2003 by replacing it with the Unlisted Public Companies (Preferential Allotment) Rules, 2011 to ensure more disclosures and keeping the securities in demat form . “Further checks and balances, coupled with stringent penalty provisions have been built into the Companies Bill to prevent misuse,” the ministry stated.
Sahara Prime City, a Sahara Group company intending to go for an IPO, had filed information about its group companies to Sebi in its Draft Red Herring Prospectus.
Sebi, which noticed inadequacy in material disclosures under Sebi’s disclosure requirements sought more information about some Sahara Group companies.
After Sahara did not respond to Sebi’s query, the market regulator passed an interim order issuing showcause to two Sahara Group companies, SIRECL and SHICL, and restraining them from mobilizing funds from the public.This order was legally challenged by the companies and the case is now subjudice before the High Court of Allahabad, Lucknow Bench, MCA stated. As this is a matter between the Sahara Group companies and Sebi, MCA cannot intervene in the matter, it clarified.
