Mumbai : India’s capital market regulator has moved the nation’s apex court, challenging an interim stay ordered by the Allahabad high court on an order banning some Sahara group entities from raising public funds.
The Securities and Exchange Board of India or Sebi, moved the Supreme Court last week.
The case will be heard on Tuesday, according to two persons familiar with the development who spoke on condition of anonymity. The high court is scheduled to hear the case on 12 January.
One of the two persons, a Sahara Group lawyer, said the company will wait for directions from the apex court before making any move.
R.N. Trivedi, the Sebi lawyer, declined to comment.
A Sahara spokesperson, too, did not offer any comment, noting that the “matter is sub judice”.
On 24 November, Sebi banned several Sahara group entities, including its chief Subrata Roy Sahara, from raising money from the public for allegedly violating public issue norms and refusing to cooperate with Sebi in its attempts to gather information.
Sahara challenged the order before the Lucknow bench of Allahabad high court, saying Sebi did not have any jurisdiction over the group companies as they were not listed and do not intend to list their shares on the stock exchanges.
It also said the order was passed ex parte, violating principles of natural justice.
Sebi counsel had argued that the contention that the petitioners do not intend to get listed is void in view of provisions contained in Section 73 (1) and 73 (4) of the Companies Act.
“There is compulsory legal obligation to get the company listed,” he had said.
The Sahara group raised Rs4,843.37 crore through a sale of debentures and the interest accrued and the interest due for payment to these debenture holders was Rs541.79 crore as of 30 June, 2010, according to the 13 December order of the Allahabad high court.
According to the Sebi lawyer, the petitioner company should be deemed to be a public company.
The Sebi lawyer also referred to the sub-section 67 (3) of Companies Act which says that in case an offer is made to less than 50 persons, it can be treated as private placement, but if it is made to 50 persons or more, it should be treated as a public offer.
“In the present context, keeping in view the amount involved, it shall be (a) public offer and shall require the listing of the company,” he argued.
On 13 December, the Allahabad high court passed an order stating, “As an interim measure, the operation of the impugned order...is stayed with liberty to Sebi to proceed with the inquiry but no final decision shall be taken.”
It also directed the Registrar of Companies (RoC) to investigate the matter in the interest of investors and submit a status report. It directed Sahara to provide necessary information to RoC in three weeks.
Including this, there have been three instances in recent times when a case relating to Sebi’s jurisdiction has been taken to the apex court. In June 2010, Sebi had sought the intervention of the Supreme Court to sort out a dispute with insurance regulator Insurance Regulatory and Development Authority over regulation of unit-linked insurance plans, or Ulips.
In August, a division bench of the Bombay high court, on a case relating to the fraud at Satyam Computer Services Ltd, ruled that Sebi had jurisdiction to pull up auditors of listed companies.
Auditor Price Waterhouse had sought and received the bench’s permission to allow an appeal in the Supreme Court, but did not proceed with the appeal.
Sebi took exception to the delaying tactics of the auditors’ counsel while passing an order, allowing the auditors to cross-examine key officials.