We can regulate unlisted companies if they raise public funds: SEBI

"If OFCD is a security under the Securities Act, then it comes under the SEBI Act. And if it comes under the SEBI Act, then SEBI has jurisdiction," SEBI counsel Arvind P Datar claimed before SAT

Mumbai: Market watchdog Securities and Exchange Board of India (SEBI) on Thursday claimed before the Securities Appellate tribunal (SAT) that the Companies Act gives it enough powers to regulate unlisted companies if such entities have raised funds from the public, reports PTI.

"Does SEBI have powers under Section 55A (of the Companies Act? My answer is yes. If OFCD (optional fully convertible debenture) is a security under the Securities Act, then it comes under the SEBI Act. And if it comes under the SEBI Act, then SEBI has jurisdiction. SEBI can (therefore) pass a special order to regulate unlisted companies," SEBI counsel Arvind P Datar claimed before SAT.

Mr Datar was contesting Sahara Group's claim that its OFCD were not a public issue and therefore cannot be regulated by SEBI.

Sahara had been ordered by SEBI to refund the money its two group companies had raised from the public through an OFCD issue The company has challenged the SEBI order at the SAT.

Mr Datar further argued that Sahara companies' OFCDs were issued to the public and that it was actually "a public offer dressed up as a private placement".

Pointing out that even the legal provisions which Sahara took recourse to were meant for a public issue, Mr Datar said, Sahara has taken recourse to Section 60B of the Companies Act, a provision meant for a public issue. Once it is a public issue then listing becomes mandatory under Section 73 (1) of the Companies Act.

Mr Datar further said if an OFCD can indeed be defined as a security, then under the SEBI Act, the market regulator has jurisdiction.

"They can only come under Section 55 A, Clause B. If one goes by a literal interpretation of this provision, then that would be very absurd, and the appellant may argue that this does not cover them," Mr Datar said.

"We must understand why this provision was introduced in the first place. It was introduced, because Parliament wanted to give SEBI all powers," Mr Datar said.

"Intention does not matter because under this provision, listing becomes mandatory. Merely because the appellant gives it the tag of a private issue does not make it one. After all, Section 73 (1) of the Companies Act makes it mandatory for the appellant (Sahara) to seek the approval of the stock exchange," he said.

"A literal interpretation of Section 55 A would defeat the intention of Parliament.... Intention of a company is not a decision itself, but the three-fold test of conduct, circumstances of the case as well as terms of the contract, is. If the company knew it would cross the limit of 50 investors, then it ought to have listed," the SEBI counsel said.

SAT's presiding officer NK Sodhi observed, "If it is a public issue, they should have gone to the stock exchange, and so Section 73 (2) of the Companies Act follows. The necessary consequence is a refund of the money under Section 73 (2). But who will give such a direction to refund? Should it be SEBI?"
The SEBI counsel replied that Section 55 A of the Companies Act will have the answer as to who can issue such a direction.

Mr Sodhi then observed that consequence could be that Sahara's public issue will go out of listing and 66 lakh investors will not be able to trade their securities.

Arguing that Section 73 (1) of the Companies Act ought to be read in consonance with Section 55 A Clause B, which deals with intention of the company, Mr Datar said under Section 245 AA of the Companies Act, securities include 'hybrid' financial instruments. According to Section 55 A, the word 'securities' also includes future financial instruments which are yet to evolve, Mr Datar added.

To this, Mr Sodhi asked Mr Datar what is the consequence of calling OFCD a security. He pointed out that Sahara had submitted to the Allahabad High Court that SEBI could not regulate it because the instrument was a 'hybrid' and that under the Securities Contract Regulation Act, an OFCD is not a security.

SAT will resume hearing next Monday. Incidentally, the Supreme Court's deadline for the case is 5th October.

SAT has directed Sahara to file an affidavit by Monday, specifying from which date it began mobilising funds from investors. Further, it also asked the appellant to specify the total amount of funds mobilised till date, the number of investors involved, as well as the mode of fund mobilisation.

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SEBI asks MFs to send annual reports to unit holders via email

The regulator has also directed the MFs to ensure that a consolidated account statement for each month is issued to the investors who have undertaken any transactions in their accounts during that month

Mumbai: As part of green initiative, market regulator Securities and Exchange Board of India (SEBI) today directed mutual funds (MFs) to send copies of annual reports to unit holders through e-mail, reports PTI.

"In order to bring cost effectiveness in printing and dispatching the annual reports or abridged summary and as a green initiative measure... the asset management companies (AMCs) shall communicate to them stating that henceforth, the scheme annual reports or abridged summary would only be sent by email," SEBI said in a circular.

"The communication ... shall clearly mention that the scheme annual accounts or abridged summary would henceforth be sent to these e-mail addresses and not as physical copies and the communication shall also have an option for the investors stating that those who still wish to receive the reports as physical copies may indicate as such," it said.

However, in case if any shareholder asks specifically for physical copies, the MFs have been told to provide the documents in such a form.

"For the rest of the investors, i.e. whose email addresses are not available with the mutual fund, the AMCs shall continue to send physical copies of scheme annual reports or abridged summary," SEBI said.

Meanwhile, the regulator has also directed the MFs to ensure that a consolidated account statement for each month is issued to the investors who have undertaken any transactions in their accounts during that month.

"AMCs shall ensure that consolidated account statement for each calendar month is issued to the investors in whose folios transactions have taken place during that month," the circular said.

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Domestic car sales dip 10% in August; two-wheeler sales up 16%

Total sales of vehicles across categories registered a growth of 11.85% to 1,412,945 units in August, as against 1,263,239 units in the same month last year, as per data released by SIAM

New Delhi: Domestic passenger car sales declined by 10.08% to 144,516 units in August 2011, from 160,713 units in the same month last year, reports PTI quoting figures released by the Society of Indian Automobile Manufacturers (SIAM).

Motorcycle sales in the country grew by 15.43% during the month to 839,772 units from 727,542 units in the corresponding month last year.

Total two-wheeler sales grew by 16.1% to 1,111,340 units last month from 957,236 units in August 2010, as per the data.

Sales of commercial vehicles grew by 22.62% to 64,248 units in the month under review from 52,394 units in the year-ago period, SIAM said.

Total sales of vehicles across categories registered a growth of 11.85% to 1,412,945 units in August, as against 1,263,239 units in the same month last year, it added.

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