SEBI sets up ‘Sahara cell’ to execute apex court order

K. R. Srivats New Delhi | Updated on March 12, 2018

U. K. Sinha, Chairman, SEBI.

Dedicated unit likely to outsource some work; may rope in a registrar

The Securities and Exchange Board of India has set up a Sahara Enforcement Cell (SEC) to implement the Supreme Court’s directions in the recent landmark judgment on two Sahara Group companies.

The apex court had on August 31 ordered Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) to return the Rs 24,029 crore, cumulatively collected by the two companies from 29.6 million investors, along with 15 per cent interest per annum.

These two Sahara Group companies have 90 days to deposit the money with SEBI, which would have to return the money to investors, the Supreme Court had ruled.

To ensure that the Supreme Court’s directions are implemented, SEBI has now formed a cell which would, to start with, comprise two existing General Managers. The two, who will work under the overall supervision of a SEBI whole-time member, will go about the task of identifying the investors and see that the money is refunded to them, sources close to the developments said.

This new cell has also been empowered to outsource some of its work. Indications are that it may rope in an external registrar to handle the data processing of investors who are identified for refunds.

A retired Supreme Court judge, R. N. Agarwal, has already been appointed by the apex court to oversee whether the directions issued by the Supreme Court are being complied with by SEBI or not.

To mobilise the funds, the two Sahara Group companies — SIREC and SHIC — had used the instrument of unsecured optionally fully convertible debentures (OFCDs) by way of a private placement.

SIREC had in an information memorandum for prospective investors — prospectus filed with the Registrar of Companies (RoC), Kanpur, in March 2008 — clarified that the issue was a private placement and the company had no intention of listing the OFCDs in any exchange in India or abroad.

Funds mobilised

This company had issued OFCDs on an open-ended basis and it had collected over Rs 19,400 crore from 22.1 million investors between April 25, 2008 and April 13, 2011. After redemptions, the amount stood at Rs 17,656 crore as on August 31, 2011.

Similarly, SHIC had raised Rs 6,373 crore from 7.5 million investors through a prospectus filed with the RoC, Mumbai, in October 2009, the Supreme Court order noted.

Asked about the role of the Ministry of Corporate Affairs (MCA) post the Supreme Court judgment, a senior official said that the Ministry may work in tandem with SEBI on the implementation of court directions in the Sahara case. But the official maintained that it was SEBI which had full jurisdiction over public issues.

The MCA has been changing its position in the recent years as regards its oversight on unlisted companies, especially when such companies raised funds through patently public issues.

In early 2011, the Government had taken the position that unlisted companies such as SIREC and SHIC should be regulated by MCA and not SEBI. This stance, however, got reversed in the second half of 2011 after a new minister took charge of the Ministry.


Published on September 08, 2012

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