The apex court while upholding SAT verdict, also asked SEBI to probe Sahara India Real Estate Corp and Sahara Housing Investment Corp and find out their actual subscriber base
In a big blow to Subrata Roy-led Sahara group, the Supreme Court on Friday asked the group to refund Rs17,400 crore collected from investors within three months with 15% interest. While upholding the verdict given by Securities Appellate Tribunal (SAT), the apex court also asked market regulator Securities and Exchange Board of India (SEBI) to conduct probe against two Sahara group companies and find out their actual subscriber base.
A bench of justices KS Radhakrishnan and JS Khehar granted three months time to Sahara India Real Estate Corp (SIRECL) and Sahara Housing Investment Corp (SHICL) to refund the amount. The Supreme Court has appointed retired apex court judge Justice BN Aggarwal to oversee the probe by SEBI against the two Sahara companies.
The bench also directed SEBI to take action against these two companies, if they fail to refund the money, while allowing regulators to attach properties and freeze bank accounts of SIRECL and SHICL, if they did not comply with its order.
Last year, SEBI had warned investors that Sahara India Real Estate and Sahara Housing Investment have been raising funds without its approval and it will not be able to redress any complaint in this regard. The two Sahara group companies have been raising funds through optionally fully convertible debentures (OFCDs), which SEBI said "were not issued in compliance with the applicable SEBI regulations..."
OFCDs are a type of bond with the option to fully convert them into equity at a rate decided by the company.
Subsequently, Sahara Group contested SEBI's authority to look into the issue in the Supreme Court, asserting that it was a privately held company and not listed and therefore, was under the jurisdiction of the Ministry of Corporate Affairs (MCA).
Earlier, on 27th June, a vacation bench of the apex court, comprising justices P Sathasivam and AK Patnaik had declined to hear the plea of Sahara India Real Estate Corp and asked to list it before the chief justice which has been hearing the case.
Following the orders of the Supreme Court, SEBI had on 23rd June passed an order and directed the two Sahara group companies to refund the money raised by them in OFCD citing violation of regulatory norms.
As per SEBI's order, the two companies and its promoter Subrata Roy Sahara, and the directors-Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary—jointly and severally, shall refund the money collected, the order said.
Besides, the regulator has also restrained the entities from accessing the securities market for raising funds, till the time payments are made to the satisfaction of the SEBI.
As per the order of the 12th May order of the apex court, the order of the SEBI order was not to take effect till its further order.
During the last hearing on 12th May, the apex court had asked SEBI to proceed with its probe into Sahara group's OFCD scheme by observing that investors may not have any knowledge about these products and might feel cheated like in the Harshad Mehta scam.
The court had also allowed Allahabad High Court to proceed with its hearing, where the Sahara group has challenged SEBI's direction to give details of its investors.
The group had earlier told the court that it has filed an affidavit explaining that it will protect the interests of 2.3 crore investors who have put in their money in SIRECL and SHICL.
According to the affidavits filed by the companies, as on August 2011, SIRECL had an outstanding of Rs17,656 crore to 22.1 million investors and SHICL had an investor base of 7.5 million and an outstanding of Rs6,373 crore.
Sahara Real Estate floated an issue of OFCDs and started collecting subscriptions from investors with effect from 25 April 2008 up to 13 April 2011. During this period, the company claimed to have collected over Rs19,400 crore, while up to 31 August 2011, the company had a total collection of over Rs17,656 crore. The amount was collected from over two crore investors. But the surprise was that Sahara claimed that it was not a ‘public’ issue as the OFCDs were offered to only its workers and persons associated with the Sahara group.
SEBI investigations found that only part of the proceeds from the preferential allotment were received by Aastha and the same funds were re-circulated as the allotment consideration from the five entities
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has ordered permanent freezing of 'illegal' shares allotted by Aastha Broadcasting Network about 12 years ago on preferential basis to five of its promoter entities, on charges of fraudulent market dealing, reports PTI.
The shares allotted to five entities -- Chneena Impex Pvt Ltd, CEEAN Impex Pvt Ltd, Smitasha Impex Pvt Ltd Prarekha Exim Pvt Ltd and Bicharshil Traders Ltd -- would remain frozen permanently, SEBI said in an order.
SEBI said the preferential allotment was 'irregular and illegal'. It added that the allotment itself was found to be 'fraudulent'.
According to the regulator, if the "illegally allotted shares" are not frozen permanently, there is every likelihood of those shares being offloaded into the market, which would disturb the equilibrium.
In 2000, the company had allotted 93 lakh shares to various entities on preferential basis. Out of the total, 51 lakh shares were given to five entities.
BSE found that Aastha issued 93 lakh shares on preferential allotment to various entities, where some of them appeared to be related to each other as well as with Aastha.
However, stock exchange BSE was not satisfied with responses of Aastha regarding queries about full consideration from the allottees in respect of preferential allotment.
Later, SEBI investigations found that only part of the proceeds from the preferential allotment were received by Aastha and the same funds were re-circulated as the allotment consideration from the allottees.
In an interim order in January, 2004, SEBI had prohibited the preferential allottees and other entities -- to whom the shares had been transferred by the allottees -- from buying, selling or dealing in securities of Aastha.
SEBI, in its final order in September 2005, prohibited Aastha and other 39 entities from dealing in securities market.
"Since these tainted shares are already dematerialised, the circulation of these shares in the market through trading or otherwise transfer can be prevented by freezing them permanently," SEBI said.
"If this is not done, the noticees who got the shares fraudulently might offload those shares in the market and reduce the value of the existing shareholders. It will also shake the investor confidence," it added.
Formerly known as CMM Broadcasting Network, Aastha broadcasts various spiritual and religious programmes. It broadcasts programmes in Hindi, Gujarati and English.
Currently, shares of Aastha are suspended on the BSE due to penal reasons.
SEBI suspended registration of Rajkumar C Basantani and Kolar Sharex for allegedly misleading investors