Supreme Court Makes SEBI Besahara!

सहारा [Sahara] in हिंदी [Hindi] means *Support*. This is what Sahara group undoubtedly wished its *tens of millions* of small, small, investors spread across  countless villages and small towns of the Hindi heartland to believe. Believe they did, if the Sahara story of how over 30 million *small investors* entrusted some Rs. 240 billion into its two group companies’ OFCD [debt cum equity instruments] is bought into [read Sahara Group: Beyond the Law of the Land and किसका सहारा, सहारा परिवार?]. That meant on an average an investor gave Rs. 8000/= to Sahara group company to make his *money plant* grow. Supreme Court found this fairytale hard to believe, especially the colossal mobilisation required to reach some 13% of India’s households or say 5% of its working adult population. In its landmark order of 31 August 2012 it asked Sahara group to deposit those 240 billion with interest with Securities and Exchange Board of India [SEBI] and also provide the latter with the application form of each and every investor in its OFCD *schemes*. SEBI in turn was tasked to verify the identity of each investor and return to her the “illegally” collected monies.
Six months after the landmark Supreme Court order, SEBI has not moved much in the matter. Its feeble protests that SEBI act doesn’t have sections to give it punitive powers, or that it has approached civil court in Mumbai to freeze Sahara groups bank accounts, or it has issued notices to the Sahara group companies, did not cut any ice yesterday in the apex court. Supreme Court bench hearing the case asked SEBI why it shouldn’t be held in contempt [of its orders] along with the defaulter Sahara Group companies, Sahara India Real Estate Corporation and Sahara Housing Investment Corporation. The final outcome of this case would have a gargantuan impact on the regulation of corporate sector and for holding it accountable to the laws of the land. Why is SEBI dragging its feet when it is armed to the teeth by the apex court order?; is another case fit for investigation.
The total refund may have ballooned to some Rs. 380 billion according some estimates with the 15% interest that Sahara companies have to pay on the monies collected. The Business Today reported of the Supreme Court proceedings:
In fresh trouble to Sahara group, the Supreme Court Wednesday said that Sebi is free to freeze accounts and seize properties of its two companies for defying court orders by not refunding Rs 24,000 crore to investors.

The apex court also pulled up Securities and Exchange Board of India for not taking action against the companies- Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) – as per its August 31, 2012 order which had asked it to attach properties and freeze bank accounts of the companies.

It issued notice to the group to respond within four weeks why contempt action should not be initiated against the companies for not complying with its order.

“What steps are you taking? You are not taking any action. The judgement tells you what to do but you are not doing it,” a bench of justices K S Radhakrishnan and J S Khehar said.

The market regulator submitted that it is taking action and issued notice to the companies and approached civil court in Bombay for freezing bank accounts.

Not satisfied by its contention, the bench said that issuing notice is not enough and that SEBI has to follow its last year’s order.

“Why you gave notice and did not take action. You have to execute our order,” the bench said.

The bench also made it clear that the proceedings pending before it on contempt plea against the companies would not come in the way of SEBI taking action against the group.

The apex court had on August 31 last year directed the two companies to refund around Rs 24,000 crore to their investors within three months with 15 per cent interest per annum for raising the amount from its investors in violation of rules and regulations.

In stinging observations against the companies, the court had said that such economic offences must be dealt with “iron hand”.

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2 Responses to “Supreme Court Makes SEBI Besahara!”

  1. Sadanand Patwardhan Says:

    ET Suchetana RaySahara India Real Estate Corp came under the glare of the market regulator Sebi and was recently directed by the Supreme Court to refund investors in two instalments by the first week of February.The two Sahara companies had mobilised close to Rs 20,000 crore from millions of investors, who subscribed to convertible debentures issued by the entities.A slice of the money, about Rs 3,620 crore, was placed as deposits with the Lucknow branch of ING Vysya and the Khar Mumbai branch of State Bank of India.In the next step, the fund was transferred to the account of Sahara Group company Aamby Valley Ltd at a Lucknow branch of Punjab National Bank. According to ED officials, the money was given as a loan to Aamby Valley by the other two Sahara companies.Shortly after this, Sahara carried out the crucial financial transaction that paved the pay for remitting the money abroad. The unsecured loan to Aamby Valley was converted into equity – a move that raised the net worth of Aamby Valley from Rs 841.81 crore as of March 31, 2009, to Rs 6,058.91 crore as of March 31, 2010. A higher net worth enabled Aamby Valley to remit funds offshore under the 'automatic route' – in other words, without prior permission from the Reserve Bank of India.

  2. Dharma Kekar Says:

    Supreme Court's Kid Glove treatment of Sahara India. Sahara has repeatedly flouted SC orders. Looks like SC's writ fails here.New Delhi: The Supreme Court today asked Sahara and market regulator Sebi to formulate a mechanism for securing payment of around Rs. 19,000 crore of investors' money after the Subrata Roy-led group agreed to pledge it's immovable property as security but the market regulator questioned the sale deed and the worth of the properties.A bench of justices K S Radhakrishnan and J S Khehar asked the regulator and the Sahara group to sit together to find out mechanism and posted the case for hearing on October 28.

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