sebi:WTM/KMA/CFD/392/06/2011

SEBI · SEBI · 2010-11-24 · Dr. K. M. Abraham, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Directions issued requiring refund of OFCD monies to investors in cash, public notice of refund modalities, restraint on the two Companies from accessing the securities market for raising funds, restraint on named promoters/directors from associating with listed public companies and public companies raising money from the public, and direction to SEBI to initiate proceedings against Sahara India for collecting subscriptions.

Provisions invoked

• s. 11B
• s. 11A
• s. 11
• s. 19
• s. 12
• s. 113
• s. 81
• s. 62
• s. 55A
• s. 73
• s. 4A
• s. 108
• s. 67(3)
• s. 67
• s. 117B
• s. 117A
• s. 16
• s. 68A
• s. 32
• s. 56

Regulations

• Reg. 4(2)
• Reg. 107
• Reg. 111
• Reg. 47
• Reg. 27
• Reg. 26(4)
• Reg. 46
• Reg. 4(2)(e)
• Reg. 63
• Reg. 61(1)

Parties

• Sahara India Real Estate Corporation Limited (now Sahara Commodity Services Corporation Limited)
• Sahara Housing Investment Corporation Limited
• Subrata Roy Sahara
• Vandana Bhargava
• Ravi Shankar Dubey
• Ashok Roy Choudhary

Holding

The OFCDs issued by SIRECL and SHICL are debentures and hybrid securities within the meaning of 'securities' under Section 2(h) of the SCRA, and constitute public issues subject to SEBI's jurisdiction under the SEBI Act, DIP Guidelines and ICDR Regulations. The two Companies and their promoters/directors were directed to refund the OFCD monies to investors and were restrained from accessing the securities market until refunds are made.

Full text

Page 2 of 99 DRHP) of Sahara Prime City Limited, in respect of its proposed initial public offer, the Securities and Exchange Board of India (hereinafter referred to as SEBI) had noticed that two other companies forming part of the Sahara Group, namely, Sahara India Real Estate Corporation Limited, now known as Sahara Commodity Services Corporation Limited (hereinafter referred to as SIRECL) and Sahara Housing Investment Corporation Limited (hereinafter referred to as SHICL) had issued Optionally Fully Convertible Debentures (hereinafter referred to as OFCDs) allegedly in contravention of the provisions of the Companies Act, 1956(hereinafter referred to as the Companies Act), the Securities and Exchange Board of India Act, 1992(hereinafter referred to as the SEBI Act), the erstwhile Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 (hereinafter referred to as the DIP Guidelines) and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (hereinafter referred to as the ICDR Regulations). It was observed that SIRECL and SHICL (hereinafter collectively referred to as the two Companies) were raising sizable amounts of money from the public without conforming to the prudent disclosure and other investor protection norms which govern public issues. Moreover the details of such mobilization were also not made available in the public domain. To protect the interest of investors, SEBI, in o

Page 3 of 99 (in petition for special leave to appeal civil no. 36445/2010) before the Honourable Supreme Court of India and the Honourable Court, vide Order dated January 4, 2011 had inter alia observed as follows: “Since the impugned order is an ad-interim order and as the matter is listed for peremptory hearing on 12th January, 2011, we see no reason to interfere at this stage. However, in view of the stakes involved (including protection of the investors), we are directing the High Court to proceed with the hearing of the case on day-to-day basis from 12th January, 2011, without adjourning the case. We are directing SEBI and ROC to file its counter affidavit by 7th January, 2011, and copy be furnished immediately to Respondent No.1 herein.” …….. …….. From the said paragraph, we find that the High Court has given liberty to SEBI to proceed with the inquiry. At the same time, the High Court has directed Respondent No.1 to give the names of the investors to ROC in terms of the notice dated 21st September, 2010 and 14th October, 2010. We make it clear that SEBI would also be entitled to call for any information which it deems fit, including the names of the investors who have invested in OFCD in the course of the inquiry. Mr. Sorabjee, learned senior counsel appearing for Respondent No.1, very fairly states that they agree to give information that SEBI will call upon them to furnish in the inquiry. However, it shall be given without prejudice to the rights and contentions in

Page 4 of 99 “The petitioners were supposed to cooperate in the inquiry and their interest was protected by restraining the SEBI from passing any final orders. The matter was being heard finally 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 cannot be allowed to be violated or circumvented by any means. We, therefore, do not find any ground to continue with the

Source: SecMarx — sebi:WTM/KMA/CFD/392/06/2011. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.