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.