As the Securities and Exchange Board of India (Sebi) and Sahara India Parivar have opened new fronts over the past few days in their protracted legal battle over optionally fully convertible debentures (OFCDs), the prospects of about 30 million investors hang in the balance.
Even as the Supreme Court's November 30 deadline to refund Sahara's issue proceeds nears, Sebi Chairman U K Sinha says the regulator is on course. "All I can say is there are certain directions from the honourable Supreme Court and we are working to implement those directions," Sinha said at the sidelines of a conference in Mumbai. He, however, declined to divulge the details, saying he couldn't talk to the media on quasi judicial matters that had "not reached their finality".
Sahara group firms Sahara India Real Estate Corporation and Sahara Housing Investment Corporation had raised about ~24,029 crore from 30 million investors by issuing OFCDs. Alleging its public issue rules were violated, Sebi ordered a refund. On August 31, the Supreme Court upheld Sebi's decision and directed the firms to deposit the entire money, along with interest of 15 per cent. It entrusted Sebi with overseeing the process of refunding the money to eligible investors. In case these investors couldn't be traced, the money should go to government coffers, the court had said.
The court also directed Sahara to provide all the necessary documents within 10 days and added the entire refund operation should be completed by November 30. However, much of the past three months went towards statements, petitions and counter petitions. The Sahara group provided neither the documents, nor the money. Sebi whole-time member Prashant Saran says, "Let the money and documents come. The time to return the money would depend upon the nature of the documents."
As the Sahara group didn't adhere to the 10-day deadline for providing the documents, Sebi filed a contempt petition in the Supreme Court. Sahara firms, too, filed a review petition in the apex court. It is expected the court would take this up early next month. Separately, the group has also moved the Securities Appellate Tribunal (SAT) against Sebi's refusal to accept documents after the 10-day deadline.
Experts see Sahara's move as a bid to buy time. M S Sahoo, lawyer and former Sebi member, says, "They have gone to SAT on some technical grounds."
According to earlier reports, Sebi had moved a local court in Mumbai to initiate criminal proceedings against Sahara group promoter Subrata Roy Sahara and directors of the two group companies that raised the funds. Experts fear this may lead to another time-consuming legal tussle. "The Supreme Court has allowed Sebi to initiate criminal proceedings. They have to follow due procedure in doing so, which is why they have moved court," said Sahoo.
On condition of anonymity, a lawyer said, "The Sebi move may not affect the Sahara chief, as he is not a director in either of the two firms. Instead, Sebi should initiate action against the agents of Sahara who collected these deposits from small investors in the hinterland."