Ministry of Corporate Affairs to be made a respondent, Sahara asked to withdraw case from the Allahabad HC.
The Securities Appellate Authority (SAT) will now decide the case between the Securities and Exchange Board of India (Sebi) and two Sahara group firms – Sahara Housing Investment Corporation and Sahara India Real Estate Corporation.
A three-member Supreme Court Bench, headed by Chief Justice S H Kapadia, today directed SAT to decide the appeal against Sebi’s order against the Sahara companies within eight weeks. Till then, the Sebi order will not be operational.
On June 23, Sebi had asked the two Sahara group companies to refund the money raised through optionally fully convertible debentures (OFCDs), around Rs 4,800 crore, with 15 per cent annual interest to investors. The company appealed against the order in the court.
The Supreme Court also directed the Sahara group to withdraw its petition against Sebi in the Allahabad High Court. It said SAT would take a decision irrespective of Sebi’s interim order and the remarks passed by the Allahabad High Court on the issue.
“We make it clear, in the appeal which is proposed, that the Ministry of Corporate Affairs (MCA) should be a party as a respondent, particularly in view of issues arising in this statutory appeal,” it said.
Satish Kishan Chandani, Sahara’s legal representative, told Business Standard, “The court has left all questions of law, including the jurisdiction, open for adjudication by SAT. In doing so, SAT need not be influenced by any precedent and shall decide independently.”
Chandani said the company would file the appeal soon and seek inclusion of MCA as a party to the case. “MCA had authorised the issue of OFCDs, so they have to be there,” he said.
Senior advocate Fali S Nariman, appearing for Sahara, said till SAT’s final order, no fresh deposits would be invited.
Sebi had said in its order that the OFCD scheme did not conform to the norms and was against the interest of investors. OFCD is a debt instrument that can be converted into equity according to the terms of the offer.
Sebi said the companies did not follow the norms related to “non-disclosure” of information. If an offer or invitation to subscribe to shares or debentures is made to over 50 people, it is deemed a public issue.
Sahara’s main argument is that it is an unlisted company and so Sebi has no jurisdiction over it. It is MCA which regulates unlisted companies.
The case came to the Supreme Court last November. In an earlier hearing, the Chief Justice remarked that it was difficult to understand the concept of OFCDs and so common people would find it difficult to take an informed decision on investing in these instruments.
In a statement, the Sahara group said, “The Hon’ble Supreme Court also indicated that though the order of Sebi explains the concept of OFCD, it goes beyond the mandate. As two avenues were available for such adjudication, one being before the High Court and the other SAT, the court ordered that Sahara should file a petition before SAT.”
