Friday, July 15, 2011

SC sends Sahara-Sebi case to SAT

The Supreme Court on Friday sent the Sahara–Sebi case related to raising of funds by the Lucknowbased group through optionally fully convertible debentures (OFCDs) to the Securities Appellate Tribunal (SAT) in Mumbai and said that the Sebi’s order dated June 23, asking two Sahara group companies to refund money raised from the public, shall be put on hold.
The apex court also ordered that since the whole issue involved important questions of law under the Companies Act, 1956, under which the OFCDs were issued by Sahara, the ministry of corporate affairs (MCA) should be made a party to the petition.
The SC has given SAT eight weeks to decide whether the two Sahara group entities-—Sahara Commodity Services (earlier Sahara India Real Estate Corp or SIRECL) and Sahara Housing Investment Corp(SHICL)—can raise money through OFCDs. The Sahara group has been directed to file its petition in SAT within three weeks and the court also directed that SAT shall not be influenced by any prior orders related to the case. On its part, the Sahara group has said that it would not raise any money through OFCDs till the case is decided in SAT.
“We are of the view that keeping in mind interest of the investors... better option would be to give an opportunity to the petitioner (Sahara) a hearing before SAT,” the three-member bench of the SC, headed by chief justice S HKapadia, observed.
It may be recalled that SIRECL and SHICL had floated OFCDs schemes in 2008 and 2009, respectively, to raise money from the public, which was detected by Sebi in 2010. The market regulator alleged that these fund raisings violated several laws, including the Companies Act and the Sebi Act, 1992. Subsequently, Sebi barred the two Sahara group companies from raising any more money from investors through these instruments. Sahara group then challenged the Sebi order in the Allahabad high court, which initially stayed the regulator’s order. Sebi then moved the Supreme Court and the apex court directed the HC to hear the matter on a day-to-day basis.

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