SC upholds SAT order, Sahara to refund money

Two Sahara group firms had collected almost Rs 40,000 cr from 29.6 mn investors who had subscribed to OFCDs

The Supreme Court today upheld the Securities Appellate Tribunal (SAT) order directing two Sahara group firms to refund over Rs 24,000 crore collected from investors through optionally fully convertible debentures (OFCD).

The court has said entire amount has to be submitted with a nationalised bank within 10 working days. The court has also appointed a Supreme Court judge to monitor the entire process.

Sahara has been directed to submit all details of applicants with a whole-time member withing 10 working days.
 
Two Sahara group firms had  over collected money from over 29.6 million investors who had subscribed to companies OFCDs.

Sahara had moved the Supreme Court against this SAT order in November.

Sahara India Real Estate Corp and Sahara Housing Invest Corp had appealed in the Supreme Court against the SAT order to refund over Rs 24,029 crore to investors.
 
In October, SAT also gave a time line of six weeks to the companies to complete this unprecedented and massive refund operation.
 
In January a bench headed by chief justice SH Kapadia, asked the companies to show the "unencumbered" assets they have to cover these liabilities towards investors.

In June, a vacation bench comprises judges JS Khehar and KS Radhakrishnan heard the appeal to decide the various questions of law arising in the case. Some of these include whether OFCDs are securities, whether Sebi has jurisdiction over capital raising by an unlited company and whether OFCD money has to be refunded to investors. Senior advocates Fali S Nariman and Gopal Subramaniam argued for Sahara, while Sebi was represented by Chennai-based company law expert Arvind Datar.

According to the affidavits filed by the companies, Sahara India Real Estate had a outstanding of Rs 17,656 crore to 22.1 million investors and Sahara Housing invest corp had an investor base of 7.5 million and an outstanding of Rs 6,373 crore as on August 31, 2011. In June 2011, Sebi had ordered refund of OFCD money saying that it was raised without complying with the public issue norms laid down by Sebi.

This order was upheld by the tribunal which said the appeals do not stand not only on law but also on the facts of the case. “We are amazed that both the company and the housing company have collected huge sums of money close to Rs 40,000 crore from the unsuspecting investors without putting in place investor protection measures and without making the necessary disclosures to them or to Sebi thereby making a mockery of the regulatory system prevailing in the capital market. In the circumstances, Sebi was justified in taking action against the company,” the tribunal had observed.