In the high-profile Sahara case involving refund of over Rs 24,000 crore to investors, market regulator Sebi has got a new problem at hand -- that is handling the huge volumes of refund claims with majority of them being without necessary documents and details.
Ever since the Securities and Exchange Board of India (Sebi) began a process last month for refund of money to the genuine Sahara investors, the regulator is being flooded with the applications for such repayments.
While the volumes of such refund applications as such are huge, most of these claims are being made without necessary details and documents, sources familiar with the situation said.
The details missing in most of the applications include information about the bank accounts of the refund claimants, as also the proof of their addresses. Besides, the PAN details are also missing in a large number of applications.
While PAN details are not mandatory for the refund, except for the cases where applicants are claiming exemption from deduction of tax at source for such payments, the bank accounts are a must for all the investors seeking the refund.
Sebi has said it would directly transfer the refund money to the bank accounts of genuine investors and they cannot get the money without having a bank account. For tax exemptions, the applicants are required to provide additional details in a prescribed format, giving details of their other income and investments.
Without disclosing the exact numbers, a senior official said that most of the claims received so far are for amounts worth a few thousands of rupees, although there are also some duplicate claims with applications being made by different people for same investment details.
Two Sahara group firms, Sahara Housing Investment Corporation Ltd (SHICL) and Sahara India Real Estate Corp Ltd (SIRECL), were asked by the Supreme Court to refund more than Rs 24,000 crore raised from an estimated three crore investors through issuance of certain bonds.
Sebi, which had charged the two firms of having raised these funds through various illegalities, was asked by the Supreme Court to facilitate the refund after ascertaining the genuineness of the investors. However, Sahara group deposited only Rs 5,120 crore with Sebi and claimed that it has already refunded more than Rs 20,000 crore directly to the investors.
The Supreme Court last month told Sebi to begin refunding the money to genuine investors from Rs 5,120 crore deposited with it so far, while the matter would be heard further by the apex court next month. Besides consulting the investor details submitted to it by Saharas, Sebi has also invited direct applications from the investors for such refunds.
However, Sebi has decided to hold back the refund in cases where names of multiple investors have come to the light, pending a direction from the Supreme Court in this regard.
Sebi is also considering to launch a media campaign through advertisements in newspapers and other places to inform the investors about the prescribed format of the refund applications and the details required for the same, sources said.
While Sebi has sought applications on a prescribed format, it continues to receive claims on plain paper from many investors. On their application forms, the investors are required to provide details like account number of their Sahara bonds, the total number of such bonds, the invested amount and the mode of investments.
They are also required to submit the original bond certificates, photographs, identification and address proofs among other details with the application.
In cases where the investor's current address is different from the one mentioned in their Sahara bonds, Sebi has sought address proofs for both the addresses. Besides, the investors are also supposed to provide the proof of their marital status if there has been any change in the same since the time they made the investments.
There are discrepancies on these fronts also in the refund claims received by Sebi.
The investors have also been asked to give an undertaking to return the money in case of any false information provided in the refund application and to face any civil or criminal actions in such cases.
Besides the money collected from bondholders, Saharas have also to bear the costs incurred by Sebi in the entire refund process. Sebi is already believed to have incurred huge costs, including initial expenses of about Rs 56 crore for putting in place storage, scanning and repayment systems, for the humongous task of facilitating these refunds and Saharas have to clear these bills.
The regulator had contracted Stock Holding Corporation of India (SHCIL) for the work relating to storage, digitisation and scanning of investor documents and for creation of a database.
This contract alone was worth Rs 25.97 crore. Besides, another contract of Rs 29.88 crore was given to UTI Infrastructure Technology and Services for the work relating to redemption related activities in this case.
The Supreme Court has also appointed a retired judge to oversee the matter at a monthly remuneration of Rs 5 lakh in addition to travelling, accommodation and other expenses, all of which are borne by Sebi and recoverable from Sahara.
After Sahara firms were told by the Supreme Court to hand over the investor documents to Sebi, the group sent 128 trucks with more than 31,000 cartons of papers to the regulatory authority's headquarters in Mumbai.
Finding it impossible to store them at any of its offices, Sebi decided to keep them at a warehouse of SHCIL Projects Ltd, a subsidiary of SHCIL.