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Business News/ Companies / Sahara Prime City, Turner Construction face off over JV
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Sahara Prime City, Turner Construction face off over JV

Sahara has been dragged into global arbitration by one of its joint venture partners, adding to the group's legal woes

Sahara Group founder and chairman Subrata Roy. The global arbitration adds to the group’s legal woes even as it tries to raise `10,000 crore to secure the release of founder Roy from jail. Photo: BloombergPremium
Sahara Group founder and chairman Subrata Roy. The global arbitration adds to the group’s legal woes even as it tries to raise `10,000 crore to secure the release of founder Roy from jail. Photo: Bloomberg

Mumbai: The Sahara group has been dragged into international arbitration by one of its joint venture (JV) partners, adding to the group’s legal woes even as it tries to raise 10,000 crore to secure the release of its founder Subrata Roy from jail.

Turner Construction Co., the US unit of German construction services company Hochtief AG, has approached the International Chamber of Commerce’s court of arbitration in Paris to end its relationship with Sahara Prime City Ltd and Acropolis Capital Group. Sahara Prime City, Turner Construction and Acropolis Capital had announced a JV in 2012 to develop townships in India over 20 years. The venture is operating through an entity called Sahara Turner Construction Ltd.

“We started the arbitration in April to terminate the relationship with Sahara and Acropolis on the grounds of the inability of Sahara to execute various township projects, which was the main reason for forming a joint company," said Robert S. Peckar, founding partner of US-based law firm Peckar and Abramson PC, which is representing Turner Construction in the court.

Meanwhile, Sahara Turner Construction has filed a case with the Mumbai bench of the Company Law Board (CLB) against the Indian subsidiary of Turner Construction, alleging oppression and mismanagement by the US firm.

In its plea at CLB, Sahara Turner Construction has invoked Sections 237, 59, 397 and 398 of the Companies Act, 1956. A plain reading of these sections indicate that Sahara has alleged mismanagement of funds, fraud, misconduct towards the company or any of its members and oppression.

Sahara Prime City holds a 63% stake in the JV, with the remainder held by Acropolis Capital Group, a special situation investment and development firm, and Turner.

Emails sent to the Sahara group on Wednesday evening remained unanswered. Several phone calls made to their corporate communication officials and public relations agency did not elicit any response.

A message on LinkedIn sent to Annat Jain, managing partner of Acropolis Capital Group, also did not elicit any response.

In an emailed response to queries, Peckar said: “We believe Sahara group has moved the Company Law Board in order to divert our attention from the ongoing arbitration before the International Chamber of Commerce in Paris."

He denied the allegations made by the Sahara group in its plea at CLB. “The allegations in the petition before the Company Law Board alleging mismanagement on the part of Turner are all without merit and are untrue," said Peckar, adding that none of the new townships contemplated by “our agreements have been executed".

In February 2012, when the JV was announced, a press statement from the Sahara group had said: “The construction volume of Sahara Prime City Ltd will reach $25 billion over the next 20 years of which $2.5 billion will be completed over the next five years. Sahara Turner Construction Ltd will be the preferred contractor for the execution of this entire volume of work."

While this may be the first international court case involving the Sahara group, in India the group has been fighting a legal battle with the Securities and Exchange Board of India (Sebi) in the Supreme Court.

Sahara Prime City had approached India’s capital market regulator with a proposal to float an initial public offer (IPO) in 2009. The disclosures in the IPO prospectus said two real estate companies of the Sahara group—Sahara Commodity Services Corp. Ltd (earlier known Sahara India Real Estate Corp. Ltd, or SIRECL) and Sahara Housing Investment Corp. Ltd (SHICL)—had raised money through optionally fully convertible debentures (OFCDs).

This was allegedly in violation of Sebi’s private placement norms and the Sahara group has been locked in a legal battle with the regulator over the issue since 2010. SIRECL and SHICL collected about 24,000 crore from at least 29.61 million investors between April 2008 and April 2011 through OFCDs. The two firms were later directed by the apex court to refund the money to OFCD investors with interest.

Sahara now has to raise 10,000 crore for the bail of its chairman and managing worker Roy and two directors of SIRECL and SHICL. The three were sent to judicial custody on 4 March after a non-bailable warrant was issued against them for failing to appear before the court in contempt of court proceedings initiated by the Sebi over nonpayment of money to investors as directed by the apex court.

khushboo.n@livemint.com

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 dispute with Sebi. Mint is contesting the case.

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Published: 25 Aug 2014, 12:49 AM IST
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