The Hindu Business Line : RBI moves apex court against stay to Sahara

The issue
Sahara India Financial was found guilty of violating various regulatory norms.
The RBI had asked the company to repay existing deposits as and when they mature.

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Mumbai, June 6 The stage seems set for a long legal battle between the RBI and the Sahara Group, with the central bank approaching the Supreme Court on Friday.

The RBI has challenged Thursday’s stay granted by the Lucknow bench of the Allahabad High Court on the regulator’s earlier order that barred Sahara’s para-banking arm to take fresh deposits from investors.

The RBI is understood to have appealed for vacation of the Lucknow Bench stay and the case is scheduled to come up for hearing before the Supreme Court on July 9.

Sahara Files caveat

Apparently anticipating RBI’s move, the Sahara Group filed a caveat before the Supreme Court during the day to ensure that no ex-parte order is passed against the company, sources said. In other words, the caveat will allow Sahara’s arguments also to be heard when the Supreme Court takes up the RBI’s appeal on Monday, which could further protract the legal duel.

Both the RBI and the Sahara Group have declined to make any official statements on the development.

The Subroto Roy-owned Sahara Group had got a stay from the Lucknow Bench on Thursday, a day after the RBI ordered a freeze on the deposits of the company’s financial services arm, Sahara India Financial Corporation (SIFCL). The Sahara group has interests in mutual funds, insurance, real estate and media.

Finding SIFCL guilty of violating various regulatory norms, including non-payment of minimum rate of interests as prescribed, the RBI had also asked the company to repay the existing deposits as and when they mature. In its Wednesday’s statement, the RBI had said that SIFCL’s other “violations” included non-maintenance of stipulated asset-liability match and not informing depositors in time about the maturity of their deposits.

Set up in 1987, SIFCL has a current deposit base of about Rs 18,000 crore with a depositor base of 4.25 crore.

Sources close to the Sahara Group said after it got the stay from the Lucknow Bench on Thursday, its RNBC (residuary non-banking finance company) arm continued to do “normal business”. SIFCL, the sources said, had also continued to accept deposits from investors after the stay.

The RBI may be aware of this possibility, but has no way to monitor the RNBC’s operations, sources said.

Apart from Sahara, the other two major RNBCs operating in India are the Kolkata-based Peerless General Finance and Investment Company and Disari India Savings & Credit Corporation.

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