Supreme Court said, the Sahara group chief has not complied with its order and that is why he was being summoned
The Supreme Court while refusing the plea of Sahara Group chief Subrata Roy seeking exemption from personal appearance before it, directed him to appear on Wednesday in connection with the failure of his companies to refund Rs20,000 crore to investors.
Roy’s plea was mentioned before a bench comprising justices KS Radhakrishnan and JS Khehar which said he has to appear on Wednesday.
Senior advocate Ram Jethmalani, appearing for Roy, submitted that he will make the payment and he may be distanced with personal appearance in the court tomorrow.
However, the bench said Roy has not complied with its order and that is why he was summoned.
The bench had on 20th February come down heavily on the Sahara group for not refunding Rs20,000 crore of investors’ money despite its order and summoned Roy, Ravi Shankar Dubey, Ashok Roy Choudhary and Vandana Bhargava, directors of its units, Sahara India Real Estate Corp Ltd (SIREC) and Sahara India Housing Investment Corp Ltd (SHIC) to be personally present before it on Wednesday.
It had allowed SEBI to go ahead with the sale of properties of the group whose sale deeds were handed over to the market regulator to recover Rs20,000 crore.
“Those properties you can sell. We allow you to sell them and recover the money. If they are encumbered properties then you can file criminal case against the company. The case must be brought to a logical conclusion,” the bench had said.
It had raised question on the way the group has been defying its order for the last one-and-a-half years.
The bench had said SEBI can put those properties on auction and get the money after the market regulator had said let the company itself sell the properties and deposit the money.
The apex court in its judgement of 31 August 2012 had directed SEBI to attach properties and recover the money.
Sending a clear message that the court is not 'helpless' in taking action for flouting its directions, the apex court had on 21st November last year barred Roy from leaving the country and also restrained the group from selling any of its properties.
The website of Mt Gox, one of the major exchange for Bitcoin, is not longer online amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency
Embattled Bitcoin exchange Mt Gox has largely vanished from the Internet amid accusations that the exchange is insolvent after a years-long theft that resulted in the loss of hundreds of millions of dollars, says CNET in a report.
According to media reports, the web site for the Tokyo-based exchange has been wiped clean, as has its official Twitter feed. The disappearance of the site follows the resignation Sunday of Mt Gox from the board of the Bitcoin Foundation, a group seeking legitimacy for the currency.
Mt Gox suspended cash withdrawals on 7th February, claiming there was a problem with the programme that powers the currency and allows it to be transferred between users or exchanged for goods and services. The value of the crypto-unit has been falling ever since.
Around midday on Tuesday, a Bitcoin was worth $135, compared with the $522 quoted by the CoinDesk Bitcoin Price Index, which tracks the price of the currency on major exchanges. In January, a Bitcoin was worth more than $900 at Mt Gox, which is one of the world's oldest exchanges for the unit, says a report from AlJazeera.com.
Separately, several Bitcoin exchanges released a joint statement saying that funds under their control are held securely. The Bitcoin operators said they are working to "re-establish the trust squandered" by the failings of Mt Gox, which should not be considered a reflection of the value of Bitcoin or the digital currency industry.
Bitcoin was started in 2009 as a currency free from government controls. It had been inching toward broader acceptance despite wild swings in value in the past year. For most of the currency's history, each digital coin had been worth less than $10.
Last month, Reserve Bank of India (RBI) has cautioned users, holders and traders of virtual currencies (VC) like Bitcoin, Litecoin, BBQcoin and Dogecoin and is examining the legal and regulatory framework of VCs. In a press release, RBI stated that Bitcoin and other VCs are exposed to potential financial, operational, legal, customer protection and security related risks.
Earlier, RBI had said that VC including Bitcoin may pose several other risks to users, including the following:
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Courts need to distinguish the difference between a civil and a criminal offence. For a civil offence, the rigour of embarrassment cannot be so high as to be equated with a criminal offence
Banks led by State Bank of India (SBI) are in the practice of publishing photographs of people and public notices against companies, which have defaulted on their loan obligations. It was only last week that the union government asked banks not to publish photographs of defaulters of education loan. But what about other loan defaulters? This article is a continuation of an article previously published on this website by Vinod Kothari (Is publishing photos of home loan defaulters correct?) and takes a sharp look at the practice of name-and-shame used by banks against loan defaulters.
Who is a wilful defaulter?
A "wilful default" is deemed to have occurred if any of the following events is noted:-
a) Default in repayment obligations by the unit to the lender even when it has the capacity to honour the said obligations.
b) Default in repayment obligations by the unit to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
c) Default in repayment obligations by the unit to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets.
d) Default in repayment obligations by the unit to the lender and has also disposed off or removed the movable fixed assets or immovable property given by it for the purpose of securing a term loan without the knowledge of the bank/lender.
Whether a person is a wilful defaulter or not cannot be left to the arbitrary discretion of a bank because a bank will only be guided by its own self-interests. This decision is taken by a Committee which could still be biased towards banks at large. The best way to determine whether a default is wilful or not is in the civil court where a competent judge will look into all the facts and circumstances of the case and give both parties a chance to be heard. Labelling a defaulter as a wilful defaulter without giving him the right to due process is clearly a wrong practice which is giving excess authority to banking institutions.
Implications of being a wilful defaulter
Being a wilful defaulter has grave implications for the borrower because he is cut out from the credit sources and may be blacklisted in the financial community. A person or company would not have access to banks or capital markets for raising funds necessary for day to day operations of business and personal finance. This is extremely harsh for small and medium enterprises, traders, consumers, students and retail borrowers. In addition to this, photographs of defaulters will appear in the newspapers.
Are banks violating the law?
The banking secrecy laws as provided under the Reserve Bank of India (RBI) Act specifically debars lenders from parting with information on borrowers to anyone else, except to the central bank itself and that too when specifically called for under a prescribed format. However, information can be shared with the specific consent of the borrowers, which is often hard to obtain. By publishing the photographs, banks are clearly violating the bank secrecy laws.
Banks try to put social pressure on persons and companies by naming them as wilful defaulters and publishing their photographs. In 2006, a Madras High Court judge said: “If borrowers could find newer and newer methods to avoid repayment of the loans, the banks are also entitled to invent novel methods to recover their dues.” This leads one to think that the publication of the borrower’s photograph is a method of recovery of outstanding dues, whereas in reality the publication happens after the recovery. This is completely beyond the conscience of law. Such methods of pressure are nothing but extra legal means of obtaining recovery because there are no provisions in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFAESI Act) that allow defaulters’ photographs to be published. There is no legal sanction for such methods. Once a default comes to the courtroom, the general public becomes aware of the same because the courtroom matters are in the public domain. For example, where a person has defaulted in payment of loan due to a lending bank, under SARFAESI Act, the lending bank after taking possession under Section 13 (2) and Section 13 (4) may issue a notice that the said property has been taken over by the lender. Once possession has been taken it is implied that the legal damage to the bank has been remedied and the individual is dispossessed. If after that, the bank issues a public notice or advertisement, then it is prima facie defamatory because this advertisement cannot be a mode of recovery. Even if the individual pays up the loan due to such embarrassment, he is still defamed in the eyes of right thinking members of the public. This is not to contend that homeowners can be allowed to walk scot-free but it is ironical that the pain of losing one’s home is not sufficient and the dispossessed person has to bear the brunt of public embarrassment, as if he is a criminal.
Both Madras High Court and Madhya Pradesh High Court favoured the publication of names in newspapers whereas the Calcutta High Court and Kerala High Court have disallowed such practices. Courts need to distinguish the difference between a civil and a criminal offence. For a civil offence, the rigour of embarrassment cannot be so high as to be equated with a criminal offence. Publishing photographs in newspapers is a violation of fundamental rights enshrined under Article 21 of the Constitution and cannot be tolerated in civilised societies.
(Shambo Dey, a student of Government Law College, Mumbai, works as a Research Assistant at Vinod Kothari & Company)
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