Tribunal dismisses Sahara group appeal against Sebi

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The Securities Appellate Tribunal today dismissed an appeal by two Sahara group firms against Sebi in the high-profile case involving refund of about Rs 24,000 crore with interest to about three crore investors.

Sahara firms in their appeal had sought the tribunal's intervention in refund of investors' money and had accused the market regulator Sebi of wrongly charging them of non-compliance with a Supreme Court order in this regard.

The tribunal, however, said that any further direction in the case can be sought for and granted by the Supreme Court alone and dismissed the appeal.

"We, therefore, find the appeal premature as well as non-maintainable. Dismissed," the Securities Appellate Tribunal (SAT) said in its order passed today.

Passing the order on the appeal filed on November 27, SAT observed that "a contempt petition filed by the respondent Board (Securities and Exchange Board of India) and a review petition filed by the appellants (Sahara group firms) against the order dated August 31, 2012 are already pending before
Supreme Court."

The apex court had asked Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) to refund an estimated Rs 24,000 crore with an annual interest of 15 per cent, while Sebi was directed to facilitate the refund of this money to about three crore bondholders of the two firms.

The Supreme Court had asked these companies to furnish the documents related to these investors to Sebi within 10 days and refund the money within three months, failing which the regulator was asked to freeze the accounts and attach properties of the two firms.

Sebi issued a letter to the two companies on November 1, 2012 asking them to furnish details of all bank accounts and properties, as they "failed to furnish the documents to the Board within the stipulated time and thereby violated the direction of the Supreme Court".

In the appeal before SAT, the Sahara companies said that Sebi "has deliberately refused to accept the documents/information and wrongly proceeded on the basis that the appellants are in non-compliance of the directions in the said judgment of the Supreme Court".

The two firms pleaded before SAT that they have also filed a petition before the Supreme Court seeking review of the August 31 judgment.

They further said the firms "are apprehending that the Board may not accept the payments that may be tendered in compliance with the orders of Supreme Court as the Board has arbitrarily refused to accept the documents/ information with regard to the investors of the Optionally Fully Convertible
Debentures (OFCD) issued by the appellants.

"It is, therefore, prayed that this Tribunal may direct the Registrar, SAT, to accept custody of the amount to be paid by the appellants to the respondent by November 30 being the total amount payable by the appellants, towards outstanding and unredeemed OFCDs along with the interest thereon as per the directions of the Supreme Court."

The appeal said that Sebi be directed to provide the time frame within which the respondent will repay the amount to the OFCD holders and a scheme as to how the regulator proposes to
refund the money. Sebi counsel, however, objected to the appeal and told the tribunal that the letter issued by the regulator to the two companies was not "an appealable order" under Sebi Act.

He further submitted that the appeal is premature as no amount has been tendered by the two companies in compliance with the Supreme Court directions.

Sahara counsel Gopal Subramaniam argued that "the appellants are forced to approach this Tribunal in view of the conduct of the respondent Board in not accepting the documents tendered by them and it is apprehended that the pay order amounting to Rs 5,120 crore for repaying the amount to the OFCD subscribers will also not be accepted by the Board".

Seeking a direction for acceptance of this amount by either Sebi or the Registrar, SAT, he said, "The last date for depositing this amount is November 30, 2012 and if the amount is not accepted, it may amount to violation of the order passed by the Supreme Court."

SAT observed that Sebi has already filed a contempt petition before the Supreme Court as the required documents were not furnished by the Sahara firms to it within the
stipulated period.

"We are told a contempt petition filed by the respondent Board and a review petition filed by the appellants against the order dated August 31, 2012 are already pending before Supreme Court.

The interlocutory application has already been disposed of observing that the directions given by the Apex Court are self explanatory," the SAT order said.

"Under these circumstances, we fail to understand how this Tribunal gets the jurisdiction to entertain this appeal when the parties are supposed to take action in accordance with the directions given by the Supreme Court," it added.

The tribunal also observed that the two companies have not yet tendered the money to Sebi as per Supreme Court directions and the "cause of action, if any, will arise if the money is tendered by the appellants as per directions of the Supreme Court and the same is not accepted by the Board."

It further said that the Supreme Court is seized of the matter and Sebi "has been directed to submit status report, duly approved by Justice B N Agrawal who has been requested to oversee the implementation of the directions".

"We see no reason how this Tribunal gets jurisdiction to entertain the appeal or give any further directions in the matter. We are, therefore, of the view that any further direction or modification in the directions issued by the Supreme Court can be sought for and granted by the Supreme Court alone," SAT said, and dismissed the appeal.

In the meantime, Sebi has been cautioning the bondholders of the two companies through public notices against any pressure for shifting their investments to some other schemes.

Sebi has further said in its investor notices that it has launched prosecution proceedings against the two companies as well as some of their top officials.

After the SAT order, Sahara lawyer Satish Kishanchandani said in a statement that the two companies had offered Pay Orders of Rs 5,120 crore towards the liability of the two
companies to the tribunal.

But, SAT ordered that they cannot accept them in view of the Supreme Court decision, he said, adding that the Sahara firms wanted to give the money to the tribunal because Sebi is not accepting any documents and they fear that the regulator has no intention to give priority to repayment to the
investors.

The lawyer claimed that 60 trucks of documents are lying in Mumbai godown of Sahara and accused Sebi of avoiding the acceptance of documents for three months.