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Sebi orders banks to freeze two Sahara firms’ accounts

Accounts of promoters and directors of the two firms to be also frozen
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First Published: Wed, Feb 13 2013. 08 52 PM IST
Subrata Roy of Sahara group. The two Sahara group firms had raised Rs24,029.73 crore from investors by selling OFCDs between 2008 and 2011. The regulator had argued that the OFCD sale was in violation of public-issue norms under the companies law and the Sebi Act. Photo: Hindustan Times
Subrata Roy of Sahara group. The two Sahara group firms had raised Rs24,029.73 crore from investors by selling OFCDs between 2008 and 2011. The regulator had argued that the OFCD sale was in violation of public-issue norms under the companies law and the Sebi Act. Photo: Hindustan Times
Updated: Wed, Feb 13 2013. 11 50 PM IST
Mumbai: The Securities and Exchange Board of India (Sebi) ordered a freeze on all bank accounts of Sahara India Real Estate Corp. Ltd (SIRECL) and Sahara Housing Investment Corp. Ltd (SHICL), their promoters and directors following the Supreme Court’s criticism last week of the delay in action by the regulator.
Sebi also attached several properties, development rights in projects and equity stakes in other group firms owned by SIRECL and SHICL, according to orders issued late on Wednesday.
A Sahara spokesperson said Sebi’s order for attachment of assets is based on “old facts and details of assets as of January 2012. Since then, facts have changed in view of redemptions made by Sahara from time to time. This fact of redemption was known to Sebi. Hence, today’s order does not take into account the changed facts and circumstances”.
The Supreme Court on 6 February questioned Sebi’s inaction against the two Sahara firms despite having the power to freeze bank accounts and seize properties in pursuit of refunds of the money raised by the firms through the issuance of securities called optionally fully convertible debentures (OFCDs) to 29.6 million investors.
Sebi said in the order pertaining to SIRECL that it had failed to comply with the Supreme Court’s directions.
“Consequently, Sebi is constrained to take necessary action by passing this order...for attachment and sale of properties and freezing of bank accounts, etc.,” it said.
Sebi said SIRECL had issued OFCDs worth around Rs.19,400 crore as of 13 April 2011, while SHICL raised Rs.6,380 crore through the hybrid bonds. According to a 5 December order by the apex court, SIRECL was to pay a sum of Rs.5,120 crore immediately, then Rs.10,000 crore in the first week of January and deposit the remaining amount with 15% annual interest in the first week of February.
Sahara’s said Rs.5,120 crore has already been deposited with Sebi. Regarding the instalments to be deposited with the regulator, Sahara said it has filed an interim application before the Supreme Court asking the company be “permitted to furnish security through a credible financial institution instead...as it has already redeemed significant number of OFCD holders and any further payments to Sebi would amount to double payment”.
Sebi ordered attachment of SIRECL’s development rights worth Rs.3,459 crore in land owned by Aamby Valley Ltd, similar rights worth Rs.1,436 crore in Delhi, a stake worth Rs.1,848 crore in a project in Versova, Mumbai, a 90-95% stake worth Rs.1,105 crore in 64 special purpose vehicles of the Sahara group, and a stake worth Rs.5,207 crore in Aamby Valley among others. The company also has to recover investments worth Rs.125 crore in partnership firms and deposit with Sebi another Rs.1,655 crore that it held in cash and bank balances as of 30 November 2011, said the order.
The capital market regulator has also attached all demat accounts and investments of SIRECL in all branches of all banks.
“Consequently, all banks are directed to transfer the entire amount to Sebi-Sahara refund account,” Sebi said, adding that all the company’s movable and immovable properties will be attached with immediate effect.
In SHICL’s case, Sebi directed attachment of development rights worth Rs.1,386 crore in Aamby Valley, a 26% stake worth Rs.1,479 crore in the Versova project in Mumbai and a 30% stake worth Rs.1,000 crore in a project in Uttar Pradesh. The regulator also ordered the attachment of a 2.77% stake worth Rs.1,236 crore in Aamby Valley.
All movable and immovable properties owned by SHICL were also being attached. The company has to furnish the details of all investments to Sebi in 21 days. The company was restrained from operating all its bank accounts and directed to deposit its cash and bank balances worth Rs.309.19 crore with Sebi.
Additionally, Sebi directed the freezing of all bank and demat accounts of Sahara group founder Subrata Roy and other individuals, including Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary. All movable and immovable properties owned by them were also attached and they were directed to furnish details of all properties in their names within 21 days.
Subrata Roy, who owns 70% of both SIRECL and SHICL, was found an “officer in default” by Sebi.
“...Therefore, Subrata Roy was also made liable along with the other directors of these companies...Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary,” it said.
All four of them are liable to refund the money collected through SHICL’s OFCDs worth Rs.6,380 crore, said the Sebi order.
A copy of the order was forwarded to the Reserve Bank of India and the Enforcement Directorate by Sebi.
On 6 February, a bench headed by justices K.S. Radhakrishnan and J.S. Khehar asked Sebi, “What steps are you taking? You are not taking any action. The judgement tells you what to do, but you are not doing it.”
The court had also said that such economic offences should be handled with an “iron hand”.
The two Sahara group firms had raised Rs.24,029.73 crore from investors by selling OFCDs between 2008 and 2011. The regulator had argued that the OFCD sale was in violation of public issue norms under the companies law and the Sebi Act.
On 31 August, the Supreme Court directed SIRECL and SHICL to refund the entire money along with an annual interest of 15% to all the investors within three months. The apex court had directed Sebi to collect the money from the Sahara group firms and refund it to OFCD investors.
The court order asked the regulator to freeze bank accounts and seize properties of the two Sahara group firms if they failed to comply with the court’s directive.
On 6 December, when Sahara moved the apex court seeking more time to refund the money, a Supreme Court bench headed by Chief Justice Altamas Kabir ordered Sahara to initially deposit Rs.5,120 crore with the regulator and pay the rest in two instalments in January and February.
After Sebi filed a contempt plea against the two firms, the apex court issued a notice to the two Sahara companies asking why contempt action should not be initiated against them for not complying with the order. Sahara has to respond to the notice within four weeks. However, the court mentioned that the proceedings pending before it on the contempt plea against the companies will not come in the way of Sebi acting against the two firms.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s disputes with Sebi. Mint is contesting the case.
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First Published: Wed, Feb 13 2013. 08 52 PM IST
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