The Securities and Exchange Board of India (Sebi) has taken a tough stance against two Sahara group companies after recent reports suggested they were raising money from the public though the regulator had barred them from doing so. The capital market regulator issued a public notice on Friday, reiterating the facts of the ongoing investigations against Sahara India Real Estate Corporation and Sahara Housing Investment Corporation.
Through the fresh notice, Sebi informed investors that its earlier order, restraining both entities from raising funds through issue of optionally fully convertible debentures (OFCDs), had been upheld by the Lucknow bench of the Allahabad high court. The court orders were issued on April 7. The public notice was aimed at investors who had purchased debentures issued by the two entities.
An email query sent to Sahara remained unanswered till the time of going to press. Sebi first acted against the two companies in November last year, barring both from raising funds from the public till further directions. It was alleged that while the companies raised money through the issue of OFCDs, this information was withheld from Sebi.
The regulator further barred the promoters of these entities, including Subrata Roy Sahara and Ravi Shankar Dubey, from soliciting money from the public till further directions. They were asked to show cause “as to why action should not be initiated against them, including issuance of directions to refund the money solicited and mobilised through the prospectus issued with respect to the impugned OFCDs”.
According to the public notice, while the Lucknow bench stayed the Sebi order on December 13, 2010, it allowed the regulator to continue with its investigations and seek information from the two entities. Sebi, meanwhile, filed a petition in the Supreme Court, which gave the regulator permission to seek any information ‘which it deems fit, including the names of the investors who have invested in the OFCD in the course of the inquiry’.
Sebi, once again, moved the HC, alleging the Sahara entities were not cooperating with the investigations. Based on which, the court cancelled its earlier interim order.
“The petitioners were supposed to cooperate in the inquiry and their interest was protected by restraining Sebi from passing any final orders. The matter was being heard under the expectation that the assurances given by the learned counsel for the petitioners would be honoured by the petitioners and the matter would be finished at the earliest. But the petitioners appear to have thought otherwise. The Court’s order can not be allowed to be violated or circumvented by any means,” observed the HC bench of judges Pradeep Kant and Ritu Raj Awasthi. “We, therefore, do not find any ground to continue with the interim order, which is hereby vacated for the own conduct of the petitioners and for which they have to thank their own stars,” they added in the order dated April 7.
When contacted, a Sahara India Pariwar spokesperson said: “We have filed an SLP (special leave petition) in the Supreme Court against the order dated April 7. We are law-abiding and we are not accepting deposit.”
“The stay was vacated because we could not supply certain information to Sebi in time. However, we have given more than 90 per cent information. It is also pertinent to state that the Sebi counsel had assured and undertaken in the HC on March 4 that the data provided by the company shall be used only for the inquiry and Sebi will not misuse the same. Sahara supplied certain information on March 18 to Sebi but after receiving the data, Sebi has, vide its letter dated March 23, refused to abide by the assurance.”
"It is also pertinent to mention that in the Hon'ble Supreme Court, on 04.01.2011, the Counsel for Sahara had very fairly offered and agreed to provide information to SEBI, without prejudice to its rights and contention, during pendency of the Writ Petition challenging the jurisdiction of SEBI but SEBI has not done any thing in inquiry except only to defame us through Media," the spokesperson said.
