NEW DELHI: Sebi may still be fighting a legal battle to make Sahara pay over Rs 20,000 crore for refund to investors, but the regulator has cited Supreme Court order in this high-profile case to bring to book operators of at least five illicit money-pooling schemes.
Citing the apex court order in Sahara case, Sebi has passed orders against at least five companies and 21 individuals charged with collecting thousands of crores fraudulently through issuance of bond instruments like OFCDs, RPSs, CPSs and art funds.
Through an order passed on August 31, 2012, the Supreme Court had asked two Sahara group firms to refund more than Rs 24,000 crore collected through issuance of certain bonds to about three crore investors.
The companies were asked to deposit the money with Sebi, which was mandated to make further refunds to eligible investors. Claiming to have already refunded more than Rs 20,000 crore directly to investors in cash, Sahara later deposited Rs 5,120 crore with Sebi and has been accusing the regulator of not doing anything to make the refunds.
Sebi has filed a contempt petition against Sahara and its top officials. The Supreme Court has asked top executives of two Sahara firms to be present in the court during next hearing on February 26.
While this case continues to be fought in courts, the Sahara order by the Supreme Court continues to be cited by Sebi in its orders against entities raising funds through instruments like OFCDs (Optionally Fully Convertible Debentures), Redeemable Preference Shares (RPSs), Convertible Preference Shares (CPSs) and many more.
One of the latest order is in case of money raised by Vibgyor Allied Infrastructure Ltd (VAIL), wherein Sebi has clamped down on the company and three individuals for raising money through issuance of OFCDs in violation of norms.
Sebi began looking in this case way back in 2010 and, interestingly, the company had one once \"agreed and undertook that it shall abide by the decision of the Supreme Court in the matter of issuance of OFCDs by Sahara India Real Estate Corporation Limited and Sahara Housing Investment Corporation Limited wherein the above issues of law were pending for determination by Hon\'ble Supreme Court at that time\".
However, at a later stage of investigation the company said that the \"case is different from that of OFCD issuances by Sahara group companies as Sahara issued OFCDs to very large number of persons without any clear relationship with the issuer whereas VAIL issued its OFCDs to an identified group of persons who were members of the Vibgyor Institute of Studies, a society under the Vibgyor Group.\"
Finally, Sebi in its order observed that Supreme Court judgement in Sahara case settled all controversies with regard to questions such as whether an offer is public or private, whether Sebi had jurisdiction on issuance of securities including OFCDs to 50 persons or more, etc.
Sebi also said that Vibgyor had initially \"agreed and undertaken that they shall abide by the decision of the Supreme Court in the above mentioned Sahara case\", but they changed their stand after controversies were set at rest by the apex court through its order dated August 31, 2012.
In a different order recently passed by Sebi against Prayag Infotech Hi-Rise and 4 individuals for raising funds through certain RPSs, the Sahara order again found a mention.
While arguing its case before Sebi, this company contended that \"the provisions related to deemed public issues were not known and the same came to light only after the judgment of the Supreme Court in the matter of Saharas\".
Sebi, however, observed that the \"intent and purpose\" of these provisions were always the same and \"the position of law of those provisions were reiterated by the Supreme Court in the said judgment\".
In most of these cases, the companies have argued that such securities were not issued to the public at large and were limited to a limited group of people on private placement basis and therefore should not be considered public offer.
However, the regulations term any issuance of securities to 50 or more persons as a public offer and therefore any such offering needs approval from the Sebi.
In its order in the case of Alchemist Holding Ltd raising funds through certain RPSs also, Sebi said that the Sahara order established that the \"burden of proof\" is entirely on the company to show that the offer of securities was a private placement.
In a different order passed against Osian\'s for raising money as certain art fund investments, Sebi cited the Supreme Copurt\'s Sahara order to establish that the company raised an amount of Rs 102.40 crore from 656 investors and therefore \"it is not a private placement\".
Sebi said that the apex court judgment of August 31, 2012 held \"that an offer to fifty or more persons becomes public issue by virtue of ... (relevant section).. of the Companies Act.
The regulator further said that the Supreme Court also held that the situations that would not be generally regarded as an offer made to public would include — \"offer of securities made to less than 50 persons, offer made only to the existing shareholders of the company (right issue), offer made to a particular addressee and be accepted only persons to whom it is addressed, offer or invitation being made and it is the domestic concern of those making and receiving the offer\".
Sahara order was also referred by Sebi as a benchmark for cases of unauthorised raising of money from public when it clamped down on seven persons and one company for their involvement in the famous \'StockGuru\' fraud.
Passing the order in that case, Sebi said that the Supreme Court order in Sahara case has \"held that an offer to fifty or more persons becomes public issue\" by virtue of the relevant provisions of the Companies Act and needs compulsory listing.
In the StockGuru case, convertible preference shares were offered and issued to more than 49 persons and therefore it qualifies as a public offer, Sebi said, while adding that \'specified securities\' were offered to public without complying with the applicable provisions of Sebi Regulations and Companies Act.
The regulator also said that it was a settled position, in view of the Supreme Court order in Sahara case, that the power to administer proceedings in cases of public issue of shares or debentures lies with Sebi.
New Delhi: A Sahara Group company has been directed by the apex consumer body to refund over Rs1.43 crore to a home buyer for its failure to give possession of a bungalow in one of its housing projects near Nagpur.
The National Consumer Disputes Redressal Commission (NCDRC) held Sahara Prime City Ltd (SPCL) deficient in rendering services to the complainant and Maharashtra native Sadhana, who failed to get possession of the bungalow in the ‘Sahara City Homes’ project despite paying the full amount.
“There is no evidence of the possession having been delayed on account of reasons and circumstances beyond the control of the opposite party (SPCL). Therefore, the opposite party is clearly deficient in rendering services to the complainants by not offering possession of the bungalow.
“The complainants cannot be compelled to wait any more for possession of the said bungalow and are entitled to seek refund of the amount paid by them to SPCL, along with appropriate compensation,” the NCDRC bench presided by Justice V K Jain said.
According to the complaint filed by Sadhana, she had booked a residential bungalow in the Nagpur-based housing project of Sahara for a payment of Rs1,43,56,000 and an allotment letter was issued by the firm on 2 March, 2009.
As per the letter, the possession of the bungalow was to be delivered within 38 months from the date of allotment that was by 2 May, 2012. However, the firm not only failed to hand over the possession but could not even complete the construction.
In its order, the NCDRC noted that the Sahara firm did not file any reply within 45 days from the date on which they were served notice because of which their right to file a written reply was closed. The commission also directed the firm to pay Rs10,000 as litigation cost to the complainant.
Mumbai: The official liquidator of Sahara Group’s Aamby Valley City is ready to auction the property in June after the Supreme Court ordered the sale to recover money owed to investors, two people aware of the development said on condition of anonymity.
The funds realized from the auction has two claimants: the Securities and Exchange Board of India, and the income-tax (I-T) department. The apex court might have to step in and provide guidance, the two people added. The Sahara Group claimed the auction would not go through since it has submitted a post-dated cheque of Rs1,500 crore to the apex court.
The liquidator of the Bombay high court has submitted its report on Aamby Valley to Sebi. The value of the property is estimated at Rs43,000 crore, said one of the two people cited above. The market value of this property is likely to be higher and the auction may begin only after the next Supreme Court hearing on 19 June, this person added.
The apex court ordered the auction on 17 April after Sahara India chief Subrata Roy failed to deposit Rs5,092.64 crore with the capital markets regulator. At that time, Sahara had expressed reservations on the sale, saying that the market value of Aamby Valley was over Rs1 trillion.
“As per the order of Hon’ble Supreme Court, there is no question of auctioning of Aamby Valley as Sahara had submitted Rs. 1500/- Crore PDC (post-dated cheque) to the Hon’ble Supreme Court and the next hearing is on 19 June 2017,” said a spokesperson for Sahara in an emailed response.
Sebi did not respond to an email seeking comment.
Aamby Valley is Sahara’s flagship project, comprising luxury resorts, man-made lakes and an airport. It is spread over 4,000 hectares. In January 2012, Sahara valued the property at Rs34,000 crore.
The Sahara case relates to two group firms raising Rs24,029 crore from 29.6 million investors. Sebi said this violated its public issue norms and ordered a refund in 2011. The order was upheld by the Supreme Court in 2012 and the case has been going on since then. According to Sebi, Sahara’s total dues with interest exceed Rs47,000 crore and the group has so far remitted Rs11,477 crore, said the second person cited earlier.
Now, the taxman has stepped in demanding his pound of flesh. The Times of India first reported on 25 April that the I-T department has asked Sahara’s Aamby Valley Ltd to pay tax and penalty of Rs24,646 crore after the department added over Rs48,000 crore to the group’s income for assessment year 2012-13.
The Sahara spokesperson disputed this.
“As per the orders of Hon’ble Court, Aamby Valley is not on sale. Secondly as per the Hon’ble Court’s order, any amount either from Sahara or from sales proceeds from its other properties conducted by Sahara will directly go to Sahara-Sebi Account,” said the spokesperson.
To amicably settle the matter, the I-T department and Sebi may ask the Supreme Court to provide guidance, said the second person.
“In such a scenario, the first right to the assets or funds realized post-sale of these assets vests with the government, that is, the income-tax department,” said Vijay Pal Dalmia, senior litigator and partner at law firm Vaish Associates.
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 the Securities and Exchange Board of India. Mint is contesting the case.
SAHARA INDIA Real Estate Corporation Limited, named as an accused by market regulator Securities and Exchange Board of India for alleged violations, on Thursday sought discharge before a sessions court. Two of its directors and Sahara Group chief Subrata Roy were granted relief last month by cancellation of a non-bailable warrant after they appeared before the court.
The plea filed on behalf of the company through advocate Ashok Saraogi claims that since identical allegations and complaint made by Sebi has already been decided upon by a Lucknow court by levying a penalty, another prosecution cannot take place in Mumbai, as it amounts to ‘double jeopardy.’ Saraogi said that if the company, named as accused number one in the complaint, is discharged from the case, it would also mean relief for its directors and shareholders. The plea will come up for hearing on June 7.
The case pertains to Roy and two directors of Sahara group firms for alleged violations of SEBI rules. Roy, Ravi Shankar Dubey and Ashok Roy Choudhary have been booked under section 24 and 27 of the SEBI Act.
Sebi, claims that the three raised Rs 24,000 crore without its mandatory approval required to make investors aware of the risks through the red herring prospectus.
Centre halts construction of mall tied to Lalu\'s family
A flat purchaser from Pune has moved a private case against Sahara Prime City Limited and Sahara India Commercial Corporation Limited. She has alleged that she booked a 3-bedroom flat in Sahara City Home in Nagpur and paid Rs36.38 lakh but the promoters neither entered into an agreement of sale nor handed over possession of the flat. In this regard, the court of judicial magistrate (first class) Shrikant Nemase recently issued summons to the firms.
Kalpana Rajendra Gaidhani (38), the complainant and resident of 137, Pratham Co-operative Housing Society in Wakad, moved a private plaint through her lawyers Devanand Dhokane and Lalit Jhunjhunwala against Sahara Prime City Limited, Sahara India Commercial Corporation Limited, Anup Mishra, Naresh and Parul Tomar under relevant sections of the Indian Penal Code, 1860 comprising criminal breach of trust and cheating and also under the Maharashtra Ownership Flats (MOFA) Act, 1963 in August this year.
Kalpana told dna, “I hail from Nagpur. My husband and I shifted to Pune for job opportunities in the software field. We planned to purchase a house in our hometown. We both were aboard when we heard about the scheme of Sahara City Homes located on Wardha Road in Nagpur. According to the scheme, we had to pay the entire amount in 18 months’ installments and accordingly, I booked a 3-bedroom flat on the third floor for Rs36.38 lakh in October 2007. Till February 2011, I paid all my installments and they informed me that the possession would be given on our last installment. Till date, they have not given me the agreement of the flat and the possession of the flat. They said there is some delay in the construction and will be giving me interest on the amount that I have paid, but nothing has been given to us. When I made inquiry in this regard they delayed the issue and made me run from pillar to post. In the past, I had to visit Nagpur many times taking leave from my job just to do the follow-up.”
She added, “Getting no response from them, I even had a plan to withdraw the amount but they told me it will take just two months. In this way a year passed. I sought legal help from a lawyer and served them a notice, to which they responded that it is better to go the legal way. I was shocked to hear this. It’s our hard-earned money and we went by the name and landed in trouble.”
Kalpana’s lawyers argued, “As per the MOFA Act it is mandatary to enter into an agreement before accepting payment in excess of 20 per cent of the total consideration amount. Also the builders have to hand over possession of the flat on the date promised and refund the amount on cancellation, if circumstances demand. Despite the legal mandate, they failed to perform the above acts without reasonable excuse and failed to comply with provision of the MOFA.”
dna tried to contact Sahara officials and an email was sent seeking their version of the issue, but till late night, dna did not receive any reply from Sahara.
Some unlisted companies are luring retail investors by issuing securities including NPS, NCDs in the garb of private placement, warns SEBI while issuing a list of 193 such entities
Market regulator Securities and Exchange Board of India (SEBI), while warning investors about investing money in dubious investment schemes has issued a list of 193 companies, including Sahara India Real Estate Corp Ltd and Sahara Housing Investment Corp Ltd that are fraudulently raising money from public.
In a release, SEBI said it has taken action against 193 such entities for issuance of securities in the form of non-convertible and convertible preference shares (NPS-CPS), non-convertible and convertible debentures (NCDs-CDs) and equity shares to public, without complying with the prescribed provisions of law. In 2015 itself, SEBI said it has passed orders against 123 companies in such cases.
The companies against which action has been taken include Togo Retail Marketing, Mumbai-based Shah Group of Builders, Aspen Nirman India, Megasys Healthcare, Siyaram Development and Construction, Matribhumi Projects and Goldmine Agro. Majority of these companies are from West Bengal followed by Madhya Pradesh.
Moneylife has been constantly warning investors about not investing in such fraudulent companies. Some of the companies on which Moneylife wrote include, Pailan Agro India Ltd, StockGuru India-SGI Research & Analysis Ltd, and Ramel Industries Ltd.