Image: Abhijit Bhatlekar/ Mint
Image: Abhijit Bhatlekar/ Mint

Sebi’s new refund order against natural law: Sahara

Sahara has maintained it had refunded more than 98% of the investors' dues directly to them

New Delhi: Slapped with a fresh 14,000 crore refund order from Sebi, embattled Sahara group on Friday said it would amount to “double payment" as investors have already been paid all their dues except about 17 crore.

In a detailed reaction to the capital markets regulator’s order against group firm Sahara India Commercial Corporation Ltd (SICCL) and others including Subrata Roy, Sahara said the directive was against the “spirit of natural law" and it would raise the matter at the appropriate platform. Sahara is already engaged in a long-running legal dispute with the Securities and Exchange Board of India (Sebi) with regard to an earlier order passed in 2011 for refund of over 24,000 crore by two other firms -- Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL).

While Sahara has already deposited a significant portion in a Sebi-Sahara account for refund to investors under a Supreme Court-monitored mechanism, the group has maintained it had refunded more than 98 per cent of the investors’ dues directly to them. As per the last update, Sebi had refunded about 100 crore to the investors after verifying their details.

Now in the SICCL case, which involves collection of over 14,000 crore from nearly 2 crore investors through certain bonds between 1998 and 2009, Sahara has again said the refund ordered by the regulator would be a case of double payment.

“ SICCL has already discharged all its OFCD (optionally fully convertible debentures) liabilities except for 17 crore as outstanding OFCD liability towards 54,804 members. The TDS deducted on interest paid has been deposited with Income Tax Department. Hence the order makes it a case of double payment for the liability, which SICCL has already discharged," the group said.

Sebi said SICCL engaged in fund mobilising activity from the public, through the offer of OFCDs and has contravened the provisions of the Companies Act. However, the group said that in 1998, SICCL had taken the written permission from ROC, Ministry of Corporate Affairs, for the first time, for issuing OFCDs.

“On our part, everything was done as per law and with all the necessary permissions from the government authorities," Sahara group said.

According to the group, its OFCD “issue opened on July 6, 1998 while first proviso to section 67(3) (where there was no restriction of 50 and above issue) of the Companies Act, 1956 was inserted through amendment with effect from December 13, 2000 with prospective effect". “In view of this position of law, the Supreme Court in its order dated August 31, 2012 observed that OFCD issue by SICCL was made in 1998 and it was before the amendment of section 67(3) by Companies Amendment Act, 2000, hence, ROC and not Sebi had jurisdiction in respect of the said OFCDs. That was the valid reason that the Supreme Court did not act anyway against SICCL," the embattled group said.

“So this order of Sebi is against the observation and conclusion drawn by the Supreme Court," it added.

Countering the regulator’s objection that all payments are to be done through banking channel, Sahara Group said it must be recalled here that, till 4 years back, as per the statement of World Bank and Reserve Bank, 50-60 per cent of Indians did not have bank accounts. “In Sahara, we have all very small depositors who have never gone to banks and banks have never come to them. They deposit small – small amounts in cash and take the repayments in cash. After all, as per the law of the Government of India, then anybody and everybody were allowed to deposit or take repayment in cash up to 20,000 and our all payments were strictly as per law. Now the limit is of 10,000," the group noted.

Sebi, in an order dated October 31, found SICCL to have raised over 14,000 crore in violation of rules and has ordered the company and its then directors including Subrata Roy to refund the money with 15 per cent annual interest. Also, it barred SICCL as well as its then directors and associated entities from the markets and from associating with any public entity.

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