This observation came when Sahara counsel Fali S Nariman told the SAT that the three Sahara promoters held no stake in the companies that approached the public for Rs19,000 crore through an OFCD issue, and that these promoter directors had quit after authorising fund mop-up
Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday criticised the brazen manner in which the Sahara Group mobilised Rs19,000 crore from the public, when none of its three promoter-directors held any stake in the companies in question or were on the board when funds were mopped up, reports PTI.
“How are investors protected if three directors have already quit. This is really bothering us. Also, those who actually presented DHRP (draft red herring prospectus) before the RoC have quit (when the funds were raise),” SAT presiding officer NK Sodhi told the Sahara counsel Fali S Nariman here.
This observation came when Mr Nariman told the SAT, through an affidavit, that the three Sahara promoters held no stake in the companies that approached the public for Rs19,000 crore through an optional fully convertible debenture (OFCD) issue, and that these promoter directors had quit after authorising fund mop-up.
“When the DHRP for OFCD issue was filed, its share capital was nil. What were the respective stakes of the company's promoters? The DHRP says the three directors who promoted the company had already left. What is really mind-boggling is how three directors who promoted the company did not have even a single share in it. Despite this, how did they even pass a resolution to collect Rs20,000 crore from investors?” Mr Sodhi sought to know.
The case relates to a June 2011 Securities and Exchange Board of India (SEBI) order which asked two firms—Sahara India Real Estate and Sahara Housing Investment Corp—to refund the money raised from an OFCD issue and restrained them from accessing capital markets.
The market watchdog also restrained Sahara promoter Subrata Roy and three directors from associating with any listed company or any firm looking to raise money from the public.
The regulator had also asked the Sahara companies to pay 15% interest to the public (over 66 lakh investors) for alleged violation of SEBI regulations.
The Sahara Group had appealed against the order in the Supreme Court, which redirected the appeal to SAT. Last week, SAT had asked the Sahara Group to explain the method by which entities had raised thousands even without any advertisement.
During the argument, Mr Nariman claimed that that neither the RoC (Registrar of Companies), Kanpur nor the SEBI raised any objection when the DRHP was filed. He also claimed the Lucknow-based group has not caused any loss to the investors.
To this Mr Sodhi quipped, “That’s because they were lucky.
Please let us know how the money raised was used. We would also like to know if the OFCDs are capable of being listed on the exchange or not.”
Another SEBI counsel DJ Khambatta, who is also the additional solicitor general, replied that it would furnish a list of OFCDs listed on the exchange on Thursday.
Mr Nariman argued that Sahara's OFCDs are of fixed price and there was no need to list them on the exchange.
The RoC also came in for flak from the SAT. “The official at the RoC who actually registered the companies has changed.
The official who came in his place shut his eyes to everything. The RoC should have asked the companies to apply to the stock exchange,” Mr Sodhi observed.
Mr Nariman contented that a public authority cannot change its stand on an issue as that would throw the law into a state of confusion. “Sahara had written to the ministry of corporate affairs for advice on SEBI’s locus standi on the issue. SEBI itself had asked Sahara to go to the Company Law Board.”
The hearing will continue today.
SEBI made it clear that the extension is applicable only to forex futures segment. The ‘conditional extension’ and will be subject to the outcome of decision of the Bombay High Court where the bourse is fighting a case on its application to enter the equity segment
Mumbai: MCX Stock Exchange on Wednesday said that regulator Securities and Exchange Board of India (SEBI) has extended for another one year its licence for currency futures trading, reports PTI.
Sources, however, said it is a ‘conditional extension’ and will be subject to the outcome of decision of the Bombay High Court where the bourse is fighting a case on its application to enter the equity segment. The final hearing is expected to come up on Friday.
They added that SEBI in a show-cause notice has asked MCX to explain why an extension should be given during the pendency of the case in the high court.
“We have received an extension of licence for currency futures trade for one year,” an MCX-SX spokesman told PTI here. Its licence to was to expire on Wednesday.
The extension could not be independently verified with SEBI.
When asked about the show-cause notice, the MCX spokesperson declined to comment as the issue formed a part of the high court proceedings between the exchange and the SEBI.
According to sources, SEBI also made it clear that the extension is applicable only to forex futures segment.
The extension will allow the privately-held exchange to continue offering trading in currency futures segment.
Currently, MCX-SX only offers trading in currency futures segment.
MCX-SX has more than 700 members and trading terminals in over 500 locations.
Sources said no field development plan by any company anywhere in the world, including 40-50 put by state-owned ONGC, have gone exactly as per the plans put on paper because of uncertainty involved in behaviour of what lies several thousand feet below the earth
New Delhi: The Solicitor General of India (SGI) has held that Reliance Industries (RIL) should not be allowed to recover the cost of facilities that remain underutilised due to lower than anticipated output at its KG-D6 gas field, reports PTI.
RIL has built facilities to handle up to 80 million metric standard cubic metres per day (mmscmd) of gas but current production is less than 45 mmscmd, a phenomenon that oil regulator Directorate General of Hydrocarbons (DGH) blames on drilling of lesser number of wells than what the company had committed in 2006 when it won approval for investing $8.8 billion.
Sources privy to the development said the DGH had been pressurising RIL to drill the committed 22 wells by March 2011, so that Dhirubhai-1 and 3 fields can produce projected 61.88 mmscmd and MA field (also in the same block) another 8.1 mmscmd.
But when RIL, which was not confident of the geology after pressure at current 18 wells fell and some showed water ingress, refused, DGH proposed to allow only proportionate recovery of cost. On DGH insistence, oil ministry sought a view from the second highest law officer of the country.
SGI Rohinton F Nariman on 17th August opined that “the cost/expenditure incurred in constructing production/ processing facilities and pipelines that are currently underutilised/have excess capacity cannot be recovered”.
The Production Sharing Contract (PSC), however, does not envisage such a move and if oil ministry is to order such a thing, RIL is likely to challenge it and may initiate arbitration proceedings.
Sources said no field development plan by any company anywhere in the world, including 40-50 put by state-owned Oil and Natural Gas Corporation (ONGC), have gone exactly as per the plans put on paper because of uncertainty involved in behaviour of what lies several thousand feet below the earth.
ONGC had on about a dozen occasions changed field development plan for its prime Mumbai High oil and gas fields.
RIL is waiting for BP Plc, who has global expertise in deep-sea exploration, to come on board before recommencing drilling at KG-D6.
Mr Nariman in his opinion states that the government has ‘an arguable case’ to stop RIL from recovering expenditure which had “resulted in excess capacity/under-utilisation of the asset created” on account of its failure to adhere to the 2006 approved field development plan.
According to the 2006 plan, RIL was to drill a further 11 wells by March 2012 to raise output to 80 mmscmd and sustain it at those levels for nine years.
RIL has so far spent $5.693 billion and has already recovered $5.258 billion from sale of gas.
Mr Nariman advised that to the extent RIL has already recovered capital expenditure from sale of gas, “the cost entitlement of the contractor can be reversed”.
The Comptroller and Auditor General (CAG) in its report on KG-D6 field audit, which was tabled in Parliament earlier this month, had not commented on reasonability of RIL hiking the capital expenditure at the nation's biggest gas field from $2.4 billion proposed in 2004 to $8.8 billion estimate in 2006.
It, however, stated that with the gas output from KG-D6 falling to about 43 mmscmd, which is close to 40 mmscmd output level envisaged in the 2004 investment plan, raised “doubts if upgradation to 80 mmscmd with substantial increase in development cost (to $8.8 billion) was justified”.
RIL submitted an initial development plan (IDP) for Dhirubhai-1 and 3 gas finds in May 2004 with capital expenditure of $2.4 billion. This was followed up with an Addendum to the IDP (AIDP) in October 2006 proposing $5.2 billion capex in Phase-1 and $3.6 billion in Phase-II.
“Most procurement activities were undertaken late in the line with the schedules of the IDP of May 2004. By contrast, activities in respect of items in the AIDP were initiated even before the submission/approval of the AIDP. Clearly, the development activities of the operator were guided by AIDP, rather than IDP,” CAG had said in the report.