Rejects the group companies' appeal

Rejecting the appeals of Sahara Group companies, the Securities Appellate Tribunal (SAT) on Tuesday asked them to refund the money raised through the optionally fully convertible debentures (OFCDs) to investors within six weeks.

“...both the appeals are dismissed...The appellants in both the appeals shall now repay within six weeks from Tuesday the amount collected from investors on the terms as set out by the whole time members (of the Securities and Exchange Board of India) in the impugned order,” SAT said in its order.

While dismissing the appeal filed by Sahara Group companies against the SEBI order, it held that the market regulator had jurisdiction over such fund raising schemes.

“...We may mention that in view of our findings that OFCDs issued by the company are securities and that the issue is a public issue requiring mandatory listing and that SEBI has the jurisdiction under the SEBI Act to deal with all kinds of securities and companies, whether listed or not...”, the order said.

It could not be immediately ascertained how much money the Sahara Group companies would have to refund to investors who had parked their funds as OFCDs.

SAT has given the two companies — Sahara India Real Estate Corporation (now known as Sahara Commodity Services Corporation Ltd.) and Sahara Housing Investment Corporation — six weeks to return the money.

SEBI had in June asked the two Sahara Group entities to return the money collected from millions of investors through the financial instrument OFCD, citing violation of regulatory norms.

The Sahara Group had challenged the SEBI order in SAT. It contended that SEBI had no jurisdiction over the issue as the companies involved were not listed. It maintained that the entities involved were privately held companies and were under the jurisdiction of the Ministry of Corporate Affairs (MCA). A similar issue was raised by Sahara in the Supreme Court, which had asked it to approach SAT in the matter.

Dismissing the contention of Sahara which was represented by senior advocate Fali S. Nariman, the SAT order said: “This argument has no merit... A plain reading of Regulation...leaves no room for doubt that the regulations apply to all public issues.”

Earlier in June, SEBI had asked the two companies to refund the money raised from hybrid instrument OFCD to investors along with 15 per cent interest. The two companies and their promoter Subrata Roy Sahara, and directors — Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary — jointly and severally were told to refund the money collected. Besides, the regulator had restrained the entities from accessing the securities market for raising funds, till the time payments were made to the satisfaction of SEBI.

Although the total amount raised by the two companies is not known, the Sahara Group companies had been raising money since 2008. The companies had been collecting money through different schemes from investors which had been estimated at several millions.

The companies had failed to apply for and obtain listing permission from recognised stock exchanges, the market regulator had said in its earlier order.

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