It is well known that the Ministry of Corporate Affairs (MCA), does not have the machinery to deal with such a large public issue of securities and its powers are limited to deal with unlisted companies with limited number of shareholders or debenture holders, Justice K S Radhakrishnan said.

And, the Legislature, in its wisdom, has conferred powers on SEBI, he added.

Optionally fully convertible debentures (OFCD) issued by Saharas are debentures in presenti and become shares in futuro. Even if OFCDs are hybrid securities, as defined in the Companies Act, they shall remain within the purview of the definition of ‘securities’ and SEBI has jurisdiction over hybrids, he said.

SEBI can exercise its jurisdiction over public companies who have issued shares or debentures to fifty or more, but not complied with the provisions of Section 73(1) by not listing its securities on a recognised stock exchange.

Hence, the Saharas were legally bound to refund the money collected to the investors and the SEBI has the power to enforce those provisions.


It was mandatory to follow the legal requirements of listing their securities for unlisted companies such as Saharas, while making an offer of shares or debentures to 50 or more persons. Once the number forty nine is crossed, the proviso to Section 67(3) kicks in and it is an issue to the public, which attracts Section 73(1) and an application for listing becomes mandatory which fall under the administration of SEBI.

(This article was published on August 31, 2012)
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