Sahara - SEBI case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it. Sahara has claimed that the said bonds are hybrid product, thus does not come under the jurisdiction of SEBI, instead is governed by Registrar of Companies (ROC) under Ministry of Corporate Affairs, from which the two companies of Sahara has already taken permission and submitted the red herring prospectus with ROC before issuing the bonds.
ahara - SEBI case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it. Sahara has claimed that the said bonds are hybrid product, thus does not come under the jurisdiction of SEBI, instead is governed by Registrar of Companies (ROC) under Ministry of Corporate Affairs, from which the two companies of Sahara has already taken permission and submitted the red herring prospectus with ROC before issuing the bonds.
SEBI in return ordered Sahara's two companies to stop issuing the said bonds and return money to investors. Sahara contested the case in various courts which eventually came to Supreme Court of India. On June 14, 2012, (during the final hearing of the case), the group had provided details of its financials up to April 30, 2012. While the court reserved its order, Sahara claims that it has already paid to 93% of the investors and discharged its OFCD liability to the tune of Rs. 23500 crores and only around Rs. 2260.69 crores are left against which Sahara has already deposited more than Rs. 12,000 crore which has with interest swelled to Rs. 16000 Crore. By August 31, 2012 the date of Supreme Court order, the group repaid majority of its OFCD investors between May the last date of hearing and by August 30, 2012 the final order. Since these repayments have not been taken into consideration, Sahara maintains that any money paid now will obviously mean a double payment towards one liability.
Sahara - SEBI case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it. Sahara has claimed that the said bonds are hybrid product, thus does not come under the jurisdiction of SEBI, instead is governed by Registrar of Companies (ROC) under Ministry of Corporate Affairs, from which the two companies of Sahara has already taken permission and submitted the red herring prospectus with ROC before issuing the bonds.
ahara - SEBI case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it. Sahara has claimed that the said bonds are hybrid product, thus does not come under the jurisdiction of SEBI, instead is governed by Registrar of Companies (ROC) under Ministry of Corporate Affairs, from which the two companies of Sahara has already taken permission and submitted the red herring prospectus with ROC before issuing the bonds.
SEBI in return ordered Sahara's two companies to stop issuing the said bonds and return money to investors. Sahara contested the case in various courts which eventually came to Supreme Court of India. On June 14, 2012, (during the final hearing of the case), the group had provided details of its financials up to April 30, 2012. While the court reserved its order, Sahara claims that it has already paid to 93% of the investors and discharged its OFCD liability to the tune of Rs. 23500 crores and only around Rs. 2260.69 crores are left against which Sahara has already deposited more than Rs. 12,000 crore which has with interest swelled to Rs. 16000 Crore. By August 31, 2012 the date of Supreme Court order, the group repaid majority of its OFCD investors between May the last date of hearing and by August 30, 2012 the final order. Since these repayments have not been taken into consideration, Sahara maintains that any money paid now will obviously mean a double payment towards one liability.
The Sahara India Pariwar investor fraud case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it.
Sahara case dealt with public issue in the garb of private placement and flouting of securities laws-all guided by the best legal brains of the country.
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The Sahara India Pariwar investor fraud case is the case of the issuance of Optionally Fully Convertible Debentures issued by the two companies of Sahara India Pariwar to which Securities and Exchange Board of India had claimed its jurisdiction and objected on why Sahara has not taken permission from it.
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2. +
INDEX
ABOUT THE COMPANY
LEGAL CASES ON SAHARA
SAHARA COMPANIES INVOLVED IN THE SCAM
BRIEF ABOUT THE CASE
METHODS OF RAISING MONEY FROM THE MARKET
WHAT SAHARA DID WRONG
WHAT SAHARA , SEBI and COURT SAID
CONCLUSION
3. +
ABOUT THE COMPANY
Sahara India Pariwar is an Indian conglomerate headquartered in Lucknow.
Founded in 1978 it is a 40 years old company.
The company has an estimated market capitalization of US$25.94 billion as of
March 2011.
Chairman ( Subrata Roy )
Business interests in finance, infrastructure & housing, media &
entertainment, consumer merchandise retail venture, manufacturing and
information technology
6. +SAHARA SCAM (BRIEF ABOUT THE CASE )
The case all began when a Chartered Accountant in Indore sent a note to the
National Housing Bank, requesting the Bank to look into the housing bonds issued
by two Sahara Group Companies, Sahara India Real Estate Corp (SIREC) and
Sahara Housing Investment Corp (SHIC), having there head quarters in Lucknow.
He found that the bonds that had been issued to a large number of investors had not
been issued as per the rules.
The National Housing Bank did not have the wherewithal to investigate the
allegation, So it forwarded the letter to the Securities and Exchange Board of India
(SEBI) , the capital markets regulator.
Mr. Abraham who was the then Director of SEBI was reviewing the Draft Red
Herring Prospectus (DRHP) to raise equity for real estate company Sahara Prime
City Ltd through an initial public offering (IPO). The DRHP disclosed details of
two associate group companies (SIREC and SHIC) that were raising huge amounts
of money from the public through optionally fully convertible debentures.
7. +
SAHARA SCAM IMPORTANT DATES
November 2010 - Securities and Exchange Board of India (SEBI) bars Sahara India Pariwar Chief,
Subrata Roy and two of its companies – Sahara India Real Estate Corp (SIREC) and Sahara Housing
Investment Corp (SHIC) from raising money from the public as they raised several thousand crores
through OFCD which SEBI deemed illegal.
December 2010 - Sahara appeals to Allahabad High Court which ordered SEBI not to take any
action until a court order is passed
January 2011 - Delhi High court issued a warrant against Subrata Roy and four other officials of the
Sahara India on a complaint that it deceived investors in a proposed housing project of Rs.24,000
crore.
February 2011 - Delhi High court stays proceedings against Subrata Roy and four other officials of
the group on a complaint that it deceived investors in a proposed housing project.
May 2011 - Supreme Court of India asked Sahara India Real Estate (SIREC) to furnish the format of
the application for an optionally fully convertible debentures (OFCD) scheme and a list of accredited
agents which raised money on company's behalf.
June 2011 - SEBI ordered Sahara firms to immediately refund the money collected through sales of
OFCDs.
8. +
SAHARA SCAM IMPORTANT DATES
October 2011 - Securities Appellate Tribunal (SAT) ordered two unlisted Sahara Group companies to
refund within six weeks about 18,000 crore with 15% interest which it had raised through a flotation of
OFCDs.
November 2011 - Sahara India Pariwar moved to Supreme Court against SAT's order and in favor of
Sahara Group it stayed the SAT order, and asked the two companies to refund 17,400 crores to their
investors and asked the details & liabilities of the companies.
January 2012 - Supreme Court gives three weeks time to Sahara India Pariwar to choose between
options to secure investments made by public in OFCD scheme. Either to give sufficient bank guarantee
or attach properties worth the amount raised through OFCD's.
May 2012 - Supreme court is informed by Senior counsel Fali Nariman (appearing for Sahara India
Real Estate Corp) that SEBI could not have taken up this issue of Sahara Group of companies raising
funds through OFCD since there was no complaint from any investor.
June 2012 - SEBI informed Supreme Court that real estate division of Sahara India Pariwar had no right
to mobilize Rs.27,000 crore from investors through optionally fully convertible debentures (OFCD)
without complying norms of Market regulator - SEBI.
9. +
SAHARA SCAM IMPORTANT DATES
August 2012 - Supreme court directs Sahara India Real Estate Corporation Ltd.
(SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) to refund over
Rs. 24,400 crore.
March 2015 – Supreme Court had directed two Sahara group companies — SIRECL
and SHICL — to return around Rs 24,000 crore with interest to nearly 3 crore investors
through market regulator SEBI in Aug 2012. The firms were later allowed to pay up by
February 2013. So, the total dues have now gone up to Rs 40,000 crore with the
accretion of interest.
July2015 - SEBI directed cancellation of Sahara Mutual Fund's certificate of
registration on expiry of a six-month period.
12. +
SECONDARY MARKET
In secondary market, the securities issued in the primary market are bought and
sold. Here, you can buy a share directly from a seller and the stock exchange or
broker acts as an intermediary between two parties.
The secondary market is actually formed by another layer of investors who deal
with primary market investor to buy and sell financial securities such as bonds,
futures and stocks. These dealings happen in the proverbial stock exchange.
National Stock Exchange (NSE) and New York Stock Exchange (NYSE) are some
popular stock exchanges. Majorly, the trade happens between investors without any
involvement with the company that issued the securities in the primary market.
13. +
WHAT SAHARA DID WRONG?
In DRHP said their company as the private company but operated as the public
company.
Took money through OFCD from more than 50 people and violating what
they have written in the DRHP.
Never reported to the SEBI.
Made fake investors and took money on the names of these investors.
Used the illegal methods such as money laundering.
NOTE – DRHP is the set of documents containing the information about the
company from financial info to operational info.
14. +
WHAT SAHARA SAID
Issue of Optimally Fully Convertible Debentures (OFCD’s) is legal.
Issue of OFCD’s is not a public issue.
OFCD are neither shared nor Debentures but “Hybrid” Class
OFCD’s are “Hybrid Instruments” cannot be listed.
Serious error is committed by SEBI.
No statutory requirement to list OFCD’s.
NOTE – OFCD initially a debenture but can be converted into the shares
and form Equity not debt
15. +
WHAT SEBI SAID
OFCD was a public issue
OFCDs were transferable securities
Violation of section 73 of Companies Act 1956
Untrue Red Herring Prospectus
Not following The Securities Contracts (Regulation) Act, 1956
The forms issued by two companies did not enclose an abridged prospectus
Did not submit Balance Sheet and P&L a/c to the concerned ROC
16. +
SUMMARY
Sahara aggrieved against the notice of SEBI moved to Allahabad High Court
and obtained a stay.
SEBI filed the petition to Supreme Court.
Recall of the earlier order
Allahabad High Court rejected the recall order.
SEBI again approached the Supreme Court
Issue of fresh notice to Sahara by SEBI.
Confirmation of violation of rules and regulations and therefore, order against
Sahara was passed
17. +
LATEST IN THE CASE
SEBI has began process of refund to investors being verified by it
Refund is being made from Rs. 5,120 crore deposited by Sahara
Non genuine investor details are provided by Sahara, many of which are fake
Refund of estimated amount of Rs. 24,000 crore
SEBI is demanding personal asset details, bank a/c of Subrata Roy
SEBI has demanded arrest of Subrata Roy
18. +
CONCLUSION
The landmark judgment by Supreme Court is a milestone in India’s corporate
Landscape
SEBI has absolute power to investigate into the matters of both listed
companies and unlisted companies
It vests SEBI to investigate into any matter concerning the interest of the
investors even if it pertains to companies which are not listed
Removes grey areas relating to issue by so called unlisted companies
Forbids such unlisted companies to take advantages of legislative loopholes
Jurisdictional gap is removed between MCA and SEBI in matters of public
interest
