Mumbai: The Lucknow bench of Allahabad high court on Thursday lifted the stay on a regulatory order that barred real estate, financial services and media conglomerate Sahara group from raising money from the public.
The court vacated the stay as the firms, Sahara India Real Estate Corp. Ltd and Sahara Housing Investment Corp. Ltd, said they had 6.6 million investors in their optionally fully convertible debenture (OFCD) issues against a maximum of 49 investors authorized by their boards.
The boards had authorized only a private placement of these instruments.
According to norms laid down by India’s capital market regulator Securities and Exchange Board of India (Sebi) and provisions of Companies Act, private placements cannot exceed 49 investors.
India’s largest public company Reliance Industries Ltd has around 3.5 million investors.
Abhijit Sarkar, head, corporate communications, Sahara India Pariwar, was overseas and unavailable for comment.
An email sent to Sahara’s public relations agency Concept PR on Thursday remained unanswered.
“Initially, they (Sahara) had contended that the debentures were placed among friends and relatives. Apparently, it seems they have a very large family,” said R.N. Trivedi, counsel for Sebi.
“The effect of this vacation is that Sahara is restrained from any money raising activity with immediate effect.”
Prashant Chandra, legal counsel of Sahara group, said they have asked the court to keep the order in abeyance.
Trivedi said though Sahara requested to keep the vacation of stay in abeyance, the court has not responded to this request. The court will begin the final hearing on the case on Friday, he added.
Trivedi also indicated Sahara has been buying time for the past several months.
After getting Supreme Court directions to seek names and addresses of investors in debentures, Sebi had sought these details in the first week of January.
“Sahara submitted a CD on March 18. But they did not share the password that is required to open this. On Thursday, they shared the password in court. The CD contained incomplete names like Guddi, Kajal and Baby listing sums of Rs 5,000,Rs 2,000 against their names,” the Sebi counsel added.
According to Trivedi, when asked to give addresses of these investors, Sahara argued that Sebi can check the telephone directory for the addresses. “The court did not buy this argument.”
Chandra, Sahara group’s legal counsel, said: “Sebi expressed its displeasure about the information we had provided to it regarding our investors. We will produce all the information tomorrow (Friday) before the court.”
On 24 November, Sebi banned several Sahara group entities including chief worker Subrata Roy from raising money from the public for allegedly violating public issue norms.
Subsequently, on 13 December, the Lucknow bench of the Allahabad high court stayed the Sebi order pending investigation. On 4 January, the Supreme Court granted Sebi permission to seek and get details of names, addresses of investors and amount invested in these investigations.
Sahara India Real Estate and Sahara Housing Investment have raised at least Rs 4,843 crore by issuing OFCDs to investors.
Sahara raised this money under three schemes—Abode Bonds, Nirman Bond and Real Estate Bond.
According to Sebi, these are in violation of public issue norms laid down under the companies law and the Sebi Act.
Sebi’s regulations on public issues prescribe eligibility criteria for accessing public money, mandate due diligence of the company and its promoters by merchant bankers, grading by credit rating agencies, and vetting of the draft red herring prospectus by the regulator against rigorous disclosures norms. Sebi said none of these norms were followed in the debenture issue.
Sahara group’s business interests include finance, entertainment, real estate and media. Its Hindi-language newspaper competes in some markets with Hindustan, published by HT Media Ltd, which also publishes Mint