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Business News/ Politics / Policy/  SC detains Subrata Roy, picks holes in refund plan
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SC detains Subrata Roy, picks holes in refund plan

Bench questions claims about investors, sends Sahara chief to judicial custody in Tihar jail until 11 March

Subrata Roy had black ink splashed on his face by a man at Supreme Court who claimed to be a lawyer from Gwalior. Photo: APPremium
Subrata Roy had black ink splashed on his face by a man at Supreme Court who claimed to be a lawyer from Gwalior. Photo: AP

New Delhi: The Supreme Court sent Sahara Group chief Subrata Roy to judicial custody in Tihar jail for a week on Tuesday after he failed to spell out a detailed plan for refunding investors who bought bonds sold by two group companies in a scheme the market regulator ruled was illegal.

A two-judge bench also questioned claims by the group of having refunded the bulk of the money directly, saying they had cast doubts over the existence of so-called investors.

It asked him to come up with such a plan, refund the money through cheques and drafts, and not cash, and deposit the money with the government if the investors could not be found.

The court also remanded two other group directors, Ravi Shankar Dubey and Ashok Roy Choudhary, in custody but spared a third, Vandana Bhargava.

Rejecting Roy’s plea against judicial custody, a bench comprising judges K.S. Radhakrishnan and J.S. Khehar said it wasn’t satisfied and sent him to jail until 11 March, when it will hear the case.

“We are not happy with the proposal. No concrete proposal has come up so far. We are not accepting this proposal," the bench said, seeking a more detailed repayment plan.

Sahara offered the Securities and Exchange Board of India (Sebi) bank guarantees for 22,500 crore and help in verifying information about investors, including those the group already claims to have repaid. It offered to depute “hundreds of competent workers" to assist the regulator.

The bench questioned the claims made by the group of having refunded money to the bulk of investors.

The claims of the group have cast suspicion over the existence of the investors, the court observed, adding that fact-finding authorities like Sebi had found they do not exist.

Roy, 65, was arrested in Lucknow on Friday, two days after the court issued a non-bailable warrant against him for failing to heed an order to appear before it. Roy pleaded that his 92-year-old mother was seriously ill and needed him by her side.

The Supreme Court is hearing a contempt petition filed by Sebi alleging that Sahara India Real Estate Corp. Ltd (SIRECL) and Sahara Housing Investment Corp. Ltd (SHICL) had failed to comply with the apex court’s 31 August 2012 directive to refund investors through the market regulator.

SIRECL and SHICL collected about 24,000 crore from at least 29.61 million investors between April 2008 and April 2011 through the sale of securities called optionally fully convertible debentures (OFCDs). The capital market regulator said the OFCD sale was in violation of public issue norms under the companies law and the Sebi Act.

While seeking more time to refund investors, Roy said the group will sell its properties to raise the money. It has already deposited 5,120 crore with the regulator, and claimed in the past that it had returned the rest of the money directly to investors—a claim contested by Sebi.

Roy promised the Supreme Court that he would comply with the court’s orders.

“I have faith in you. Punish me if I don’t comply with your order," he submitted to the two-judge bench.

The bench told Roy, “You can’t make payment in cash as it is contrary to law. You have to make payment through demand draft or cheque."

The bench also took Sahara Group to task for not abiding by its order to refund investors and taking contradictory stands on the payment of investors’ money. “You pushed us to the corner. Had you been serious, this position would not have arrived," the bench said.

The Sahara group chief’s two sons, Sushanto Roy and Seemanto Roy, were present in the court during the hearing.

Before entering the courtroom dressed in his trademark dark waist coat and trousers, a white shirt and black tie with the Sahara logo, sporting double-shade glasses, Roy had black ink splashed on his face by a man who claimed to be a lawyer from Gwalior.

“He has stolen people’s money and I am against thieves", the man said before he was taken away by the police.

Roy had been kept in a forest guest house near Lucknow since he offered himself up for arrest on Friday. In the high-security Tihar jail, he will have to sleep on the floor, eat jail food like any other prisoner and meet visitors only twice a week, Tihar spokesman Sunil Gupta told PTI.

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: 04 Mar 2014, 05:15 PM IST
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