Apex court raps SEBI for not taking action against Sahara group firms

In fresh trouble to Sahara group, the Supreme Court on Wednesday said that the Securities and Exchange Board of India is free to freeze accounts and seize properties of group’s two companies for defying court orders by not refunding Rs 24,000 crore to investors.

The apex court also pulled up SEBI for not taking action against the companies — Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) — according to its August 31, 2012 order, which had asked the market regulator to attach properties and freeze bank accounts of the companies.

The Supreme Court issued notice to the group to respond within four weeks why contempt action should not be initiated against the companies for not complying with its order.

“What steps are you taking? You are not taking any action. The judgment tells you what to do but you are not doing it,” a Bench, comprisingJustices K.S. Radhakrishnan and J.S. Khehar, said.

The market regulator submitted that it is taking action and issued notice to the companies and approached the civil court in Mumbai for freezing bank accounts.

Not satisfied by its contention, the Bench said that issuing notice is not enough and that SEBI has to follow the apex court’s last year’s order.

The Bench also made it clear that the proceedings pending before it on contempt plea against the companies would not come in the way of SEBI taking action against the group.

The apex court had on August 31 last year directed the two companies to refund around Rs 24,000 crore to their investors within three months with 15 per cent interest per annum for raising the amount from its investors in violation of rules and regulations.

Sahara’s take

The Sahara group, on the other hand, justified its stand on not refunding the amount and said that large portion of the amount has already been redeemed to investors before the judgment was delivered.

Senior advocate Ram Jethmalani, appearing for the companies, said that nothing is due and it is difficult to deposit Rs 10,000 crore.

The apex court was hearing market regulator SEBI’s contempt petition against SIREC and SHIC.

Earlier, the Group had on December 5 got nine weeks’ time from the Supreme Court to pay back Rs 24,000 crore with 15 per cent interest to over three crore investors in its two companies, with an immediate upfront payment of Rs 5,120 crore.

A Bench headed by Chief Justice Altamas Kabir had ordered the Group to immediately hand over a demand draft for Rs 5,120 crore to SEBI and said the balance amount shall be deposited with the market regulator in two instalments to be cleared by early February.

SIREC had collected Rs 19,400.87 crore on March 13, 2008 and SHICL had collected Rs 6,380.50 crore. But the total balance on August 31 is Rs 24,029.73 crore after premature redemption.

The group might have to fork out around Rs 38,000 crore, which includes the principal amount of Rs 24,029.73 crore and interest of around Rs 14,000 crore.

Respite for investors

The apex court had on August 31 last year directed Sahara India Real Estate Corporation and Sahara Housing Investment Corporation to refund around Rs 24,000 crore to their investors within three months with 15 per cent interest per annum.

This was for raising the amount from investors in violation of rules and regulations.

The Bench made it clear that if the companies fail to comply, SEBI could take recourse to all legal remedies, including attachment and sale of properties, freezing of bank accounts etc for realisations of the amounts.

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