SEBI-Sahara case: Supreme Court defers hearing till tomorrow

A bench headed by Chief Justice Altamas Kabir granted one more day to Sahara which sought additional time to make a statement on when it would return Rs27,000 crore invested by people in its two companies

New Delhi: Sahara group was on Tuesday given a day more by the Supreme Court to spell out when it would return Rs27,000 crore invested by people in its two companies, reports PTI.
A bench headed by Chief Justice Altamas Kabir granted one more day to Sahara which sought additional time to make a statement on the issue before the apex court.
Senior advocate Gopal Subramaniam, appearing for one of the Sahara group companies, made the plea following which the bench deferred the hearing of the case till tomorrow.
Sahara Group had been yesterday directed by the apex court to apprise it on the issue of refunding the money to investors.
The court had pulled it up for not refunding the money despite its order and had asked Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) to inform the court by today whether they would be able to refund the entire amount to their investors within a week.
Justice Kabir had come down heavily on the companies for not implementing the apex court's order and said they are not entitled to a hearing, but finally agreed to hear Sahara's plea saying he is more concerned about investors' money.


Collective Investment Scheme: SEBI cannot remember its own rules

In 2008, SEBI declared that art funds are collective investment schemes as per its regulations issued in 1999. In 2012, it dismissed a complaint filed by an investor against Osian's Art fund saying that the case does not fall under its purview. What exactly is happening?

Collective Investment Schemes (CIS) are rampant across the country but the market regulator Securities and Exchange Board of India (SEBI) which regulates CIS is unable to spot them. But when it does a flip flop over the most celebrated recent case of CIS, on wonders does it really intend to apply the CIS rules seriously. Indeed, the way it has changed its stance over the years regarding regulation of art funds, especially Osian's Art Fund, makes one wonder, whether the market regulator is under some kind of amnesia.


  • CIS rules came into effect in October 1999 after rampant loot by the so-called plantation companies such as Anubhav Plantations, AVI Plantation and Floriculture (SEBI’s data on companies who run CIS, contains 605 names, mostly of the plantation companies. SEBI’s CIS regulations stated that “any person proposing to carry any activity as a Collective Investment Management Company on or after the commencement of these regulations shall make an application to the Board for the grant of registration in Form A.”
  • In 2006 Osian’s launched an art fund which pooled money to invest in art. This was an open and shut case of CIS. But Osian’s did not care to be registered under SEBI’s CIS rules. The SEBI chairman then was M Damodaran, a member of Indian Administrative Service (IAS).
  • In November 2007, SEBI served a show-cause notice on Osian’s asking as to why the Fund should not be regulated. There was no consequence of this notice.
  • Osian’s half-yearly report released in February 2008, states, “Osian’s presented the case to SEBI through its legal galaxy, explained their viewpoint at length on legal as well as industry-specific issues and made submissions; since then, there has been no further communication from SEBI. No directions for registration under the CIS Regulations have been issued to the Art Fund or Oseta Investment Trustee Co Pvt Ltd as of date”. In other words, SEBI couldn’t care much.
  • In February 2008, though, SEBI issued an official advisory that art funds were collective investment schemes and would have to be registered with it or be liable to civil and criminal action. The advisory states that “in terms of section  12 (1B) of the SEBI Act, 1992, no ‘person’ shall sponsor or cause to be sponsored or cause to be carried on a collective investment scheme unless he obtains a certificate of registration from the Board in accordance with the regulations.” SEBI clarified that for a collective investment scheme to raise money from the public it is prerequisite that the entity must (a) be a company, and (b) registered with SEBI as a Collective Investment Management Company. “Therefore, the launching/ floating of the  ‘art funds’ or schemes without obtaining a certificate of registration from the Board in  terms of the provisions of the Regulations amounts to violation of the provisions of Section 12 read with Section 11 and 11AA of the SEBI Act and the Regulations. For such violations, appropriate actions, civil and criminal, under the SEBI Act may be taken by SEBI against such funds/companies,” the advisory said. Strangely, despite this, it took no action against Osian’s.
  • It woke up and granted Osian’s an opportunity for a hearing before the whole-time director of SEBI on 5 September 2008. Again, there was no further communication from SEBI after the hearing. By this time, SEBI chairman was another illustrious member of the elite IAS, CB Bhave, whose Sebi reign has been among the worst.
  • While SEBI seemed uninterested to act against Osian’s, AK Muthuswamy was knocking on SEBI’s doors about the failure of the Osian’s Art. The three-year fund was supposed to return investors’ money by 2009 but did not do so. SEBI dismissed this complaint by arguing that the case did not fall under its purview! Yes, the February 2008 advisory notwithstanding.
  • Mr Muthuswamy approached the Securities Appellate Tribunal (SAT) which asked SEBI to re-examine the issue but this time SEBI came up with another excuse. It pointed to a Madras High Court of 16 April 2012 which ostensibly ruled that the regulator does not have power to review its own orders.
  • This was somewhat of a white lie. The SAT noted that the High Court has categorically stated that its order “shall not bar the petitioner to challenge the order passed by SEBI, if so permissible in law, by filing an appeal or taking other remedies to address the grievance.”


You wonder what will be SEBI’s next step and when it will take that step. After all, the regulator is not accountable to work within a specific timeframe. Osian’s Art Fund was a three-year close-ended fund launched in June 2006.


It raised Rs102.40 crore from 656 unit-holders across 39 cities, most of them high net-worth individuals (HNIs). The scheme used to declare NAVs showing 30% returns, but when it was time for redemption, the money wasn’t forthcoming. The scheme was wound up on 10 July 2009.


The turn of events, change in stance by SEBI in the Osian's case makes one wonder, what exactly is happening. Is the market regulator under amnesia so much so that it does not even remember its own regulations, advisory and stance taken earlier? Or are Osian’s lawyers too ‘persuasive’?



Bosco Menezes

5 years ago

The word "tragicomedy" was designed for exactly this sort of thing - it would be hilarious if not so tragic !!

Hindi-Chini relations: Is it bhai-bhai or bye bye?

In the last eight years when Wen Jiabao was the Chinese premier, nothing worthwhile was achieved. On the other hand, China has been asserting its rights on Indian territories as well other regions in Asia. India must be on guard before it is too late

In the last few weeks, China has been on the front pages of newspapers all over the world, mostly for wrong reasons.


The outgoing premier, Wen Jiabao, who had met Indian prime minister Manmohan Singh fourteen times in the last eight years, has reassured the latter that the new Chinese leadership will give ‘importance’ to ties with India! Jiabao will be demitting office by March next year.


It is a different story altogether that in the last eight years when Jiabao was the premier, nothing worthwhile was achieved. Though there were no border skirmishes (as such of the 1962 scale), Indian airspace was violated several times; repeated claims were made on Arunachal Pradesh and Indians from this part of the country were “treated as persons not requiring visa to visit China” and so on. Initially, they were refused visas to visit China because they were carrying Indian passports.


In fact, when Dalai Lama visited the area, there were ‘protests’ and considered this as an ‘unfriendly’ act! Now the latest documentary onslaught involves the Chinese citizens visiting India have maps of Arunachal Pradesh and Aksai Chin being shown as parts of China. It may be recalled that Aksai Chin has been illegally occupied by China.


In an immediate retaliatory move, when the Indian Embassy in Beijing issued visa to Chinese nationals visiting India, these very areas are shown as Indian territory. So far, China has not responded to this counter move! The passports of the visiting Chinese nationals will show the conflicting maps, regardless.


To complicate the situation internationally further, even the disputed areas in South China Sea, claimed by Vietnam, Philippines, Malaysia and Taiwan, are shown in these maps as ‘Chinese’ territory.


In fact, on some of these islands, China has even started construction work! American leadership has not sent the 7th fleet to the region!


And the latest brazen move in this regard is the announcement by the Hainan Provincial authorities that they will exercise the right to inspect vessels on the South China Sea, even if they are outside the 22km international sea border!


Except for verbal protests and suitable utterances by some western spokesmen that these “unilateral actions” are ‘unacceptable’, and expect the Chinese leadership to settle the matter ‘peacefully’, as we go to the press, nothing really has happened so far....


None of the claimants like Vietnam, Malaysia, Philippines or Taiwan can match China in any way.  Besides, the trade involved with China is too big a prize to lose and yet protest they must, which is what they can do at best!


Closer at home, Pakistan is a puppet and a close ally of China. And the Chinese encirclement of India is actually tightening. The all-weather port work at Baluchistan is in full swing; the Myanmar military government is heavily dependent upon Chinese support; Bangladesh has economic ties as does Sri Lanka in many ways.


Read more India and China, here.


Set against these Chinese moves, the Indian government has not been able to gather much real support from these nations.


One cannot venture even to speculate what might happen if there is a break-away situation in Baluchistan or the Taliban from Afghanistan makes sudden moves in that area. How would the Chinese react?


In any case, India must now be on guard also against the strong possibility of China trying to occupy or making intrusions in the uninhabited islands in the Andaman group.


Chinese assurances are not worth the paper they are written on—if they write!


Read more from the same writer.


(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)


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