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Tribunal blow to Sahara

Mumbai, Oct. 18: The Securities Appellate Tribunal (SAT) today ordered two unlisted Sahara group companies to refund within six weeks about Rs 24,000 crore that they had raised through a controversial flotation of optionally fully convertible debentures (OFCDs) three years ago.

“Both the appeals are dismissed...The appellants in both the appeals shall now repay within six weeks from today the amount collected from investors on the terms as set out by the whole-time member (of Sebi) in the impugned order,” the SAT said in its order.

On June 23, Sebi had asked two Sahara group companies and its promoter and directors to refund the money collected through OFCDs along with interest of 15 per cent to be calculated for the period from the date of receipt of the money till the date of repayment. It charged the two Sahara firms with violating regulatory norms.

The two companies are Sahara India Real Estate Corporation (now Sahara Commodity Services Corporation) and Sahara Housing Investment Corporation.

The Sahara group firms had challenged the Sebi order before the SAT. They have consistently maintained that Sebi has no jurisdiction over them as they are unlisted companies and report only to the ministry of corporate affairs.

While dismissing the appeal filed by the Sahara Group companies, the SAT held Sebi had jurisdiction over such schemes.

“We may mention that in view of our findings that OFCDs issued by the company are securities and that the issue was a public issue requiring mandatory listing and that Sebi has the jurisdiction under the Sebi Act to deal with all kinds of securities and companies, whether listed or not...,” the order said.

The Sahara group said it would appeal against the order before the Supreme Court. The group maintained that Sebi had adopted contradictory positions. “In an exactly similar case, a Mumbai-based company had issued debenture (OFCD) in private placement to thousands of investors. This company was unlisted as is the exact case with Sahara and hence a parallel can be drawn,” it said.

The statement said a question was raised in Parliament over some payment issues relating to the Mumbai company. Sebi was asked by Parliament to comment. In its reply, Sebi said the private placement of debentures did not come within its jurisdiction but would fall within the ambit of the ministry of corporate affairs.

The Sahara group said it failed to understand how Sebi could reconcile its contradictory positions. After admitting to Parliament that the debentures did not come within its jurisdiction, it had asserted in a court of law in the Sahara case that “private placements come within Sebi’s jurisdiction”.

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