Case adjourned for a week.
The Supreme Court today declined the Sahara group's plea to issue a notice to the government in on a dispute with market regulator Sebi.
The Securities and Exchange Board of India had directed the firm to return funds raised from investors under an optionally fully convertible debentures (OFCD) scheme along with 15 per cent interest.
"We do not want the government to come at this stage. Let them (Sebi) clarify. We, too, have some queries," said the bench headed by Chief Justice S H Kapadia. During today's proceedings, senior advocate Fali S Nariman, appearing for the Sahara group, said it was not a listed company and only the government had jurisdiction over it and not market regulator Sebi.
"We (Sahara) are not a listed company and the government (ministry of corporate affairs) has jurisdiction over us. If there is any listed company, then Sebi has jurisdiction," he said, asking the bench to issue a notice to the government seeking a clarification of its stance.
Nariman said despite the fact that the matter was pending in the court, Sebi issued fresh notice to the group and passed the order.
The matter has been adjourned for a week.
In November, Sebi had indicated that two Sahara Group a firms — Sahara India Real Estate Corporation and Sahara Housing Investment Corporation — were raising funds from the public through OFCDs scheme without conforming to prudent disclosure and other investor protection norms. This was contested by Sahara.
On June 27, a vacation bench of the apex court, comprising judges P Sathasivam and A K Patnaik’s bench had declined to hear the plea of Sahara India Real Estate Corp and asked to list it before the chief justice which has been hearing the case.
Following the SC orders, Sebi had on June 23 passed an order and directed the two Sahara group firms to refund the money raised by them citing violation of regulatory norms.
According to Sebi's order, the two companies and its promoter Subrata Roy Sahara, and directors Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, jointly and severally, shall refund the money collected, the order said. Besides, the regulator has also restrained the entities from accessing the securities market for raising funds, till the time payments are made to the satisfaction of the Sebi. As per the order of the May 12 order of the apex court, the order of the Sebi order was not to take effect till its further order.
During the last hearing on May 12, the apex court had asked Sebi to proceed with its probe into Sahara group's OFCD scheme by observing that investors may not have any knowledge about these products and might feel cheated like in the Harshad Mehta scam. The court had 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, had also sought to know from Sahara the law under which it was running the OFCD schemes.
Though Sahara's counsel tried to explain the nuances of the OFCD scheme, 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 had said.
The court had repeatedly asked the Sahara Group to make available their brochure and other relevant information which they were giving to investors through their agents to find out the nature of the OFCD scheme.
The bench appeared unconvinced with the logic of the Sahara Group firms that OFCD schemes doesn't come under the purview of the SEBI Act.
OFCDs are a type of bond with the option to fully convert them into equity at a rate decided by the company.
