Asking Sebi to proceed with its probe into Sahara group's Optionally Fully Convertible Debentures (OFCD) scheme, the Supreme Court today said investors may not have any knowledge about these products and might feel cheated like in the Harshad Mehta scam.
"We are of view that on the question of OFCD, it requires decision of (market regulator) Sebi. Let Sebi hear and pass an order," the court said while hearing a case related to OFCDs issued by two Sahara group firms.
Hearing the case, a three-judge bench headed by Chief Justice SH Kapadia also observed that investors were not aware of this investment scheme and later they might feel cheated as was the case with Harshad Mehta securities scam that took place in 1990s.
However, the bench said the order of Securities and Exchange Board of India (Sebi) would not be operational till the court gives further direction on it.
"The order would not apply. We want to see the order of Sebi on OFCD," the bench added.
The court also allowed Allahabad High Court to proceed with its hearing, where the Sahara group has challenged Sebi's direction to give details of its investors.
The court, during the proceeding, also sought to know from Sahara the law under which it was running the OFCD schemes.
Though Sahara counsel tried to explain about the OFCD, the Apex court was not satisfied and said: "Till today, I do not know what is OFCD. How can some investors know. We want Sebi to decide."
"We want to know on what basis you were calling for investment in OFCD," the Bench asked.
The Bench mentioned that the scheme is meant for rural people and they were not aware of it.
"Investors are not aware of OFCD. At the end of day, they would come and say that they were cheated. You know Harshad Mehta's case, same modus operandi was there. Investors were not aware of the scheme," the Bench said.
The Court repeatedly asked Sahara group to make available their brochure and other relevant information which they were giving to their investor through their agents to find the nature of OFCD.
The Bench appeared unconvinced with the logic of Sahara group firms that OFCD schemes doesn't come under purview of Sebi Act.
