Transcript SAHARA V/s SEBI Presented By: Abhishek Jain Kushaldeep Gill Mansi Goel Sakshi Gulati Suvam Dhar Bba 2nd yr Sec A Contents          Introduction Sahara v/s SEBI Facts Sahara’s contention SEBI’s Contention Factual Summary Observations of Supreme Court Latest.

SAHARA
V/s
SEBI
Presented By:
Abhishek Jain
Kushaldeep Gill
Mansi Goel
Sakshi Gulati
Suvam Dhar
Bba 2nd yr Sec A
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Contents
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Introduction
Sahara v/s SEBI Facts
Sahara’s contention
SEBI’s Contention
Factual Summary
Observations of Supreme Court
Latest of the Case
Conclusion
Bibliography
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….4 to 6
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….12 to 15
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Introduction: Sahara India Pariwar
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Sahara India Pariwar an Indian conglomerate company
headquartered in Lucknow
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Diversified business in finance, infrastructure & housing,
media & entertainment, consumer retail venture etc
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Started by Mr. Subrata Roy Sahara in 1978
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Main sponsor of Indian Cricket Team (apparently withdrawn
and Hockey Team. They own an IPL Team and 42.5% stake
in Formula One’s Force India F1
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The brand Trust Report published by Trust Research
Advisory, listed Sahara in the top 100 most trusted brands
of India
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Sahara V/s SEBI: Facts
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Sahara India Real Estate Corporation Limited (SIRECL) and
Sahara Housing Investment Corporation Limited (SHIC)
issued Optimally Fully Convertible Debentures (OFCDs)
through subscriptions from investors with effect from 25th
April,2008 up to 13th April,2011
Raised around Rs. 24000 crores from investors
The purpose of issue was to carry out infrastructural
activities namely, constructing the bridges, modernizing or
setting up of airports, rail system or any other projects
which may be allotted to the company
Filed RHPs to the concerned ROC and specified intention of
company not wanting to list the shares on any stock
exchanges
As per Sahara issue of OFCDs was private placement.
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Sahara V/s SEBI: Facts Cont’d
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However, amount was collected from about 30 million
investors in the guise of a ‘Private Placement’.
The requirements applicable to the public offerings of
securities were not complied with.
Later, Sahara Prime City Limited intended to raise funds
through listing of its shares filed Prospectus to SEBI.
While processing the prospectus, SEBI received complaint
from one of the investor and ‘Professional Group of
Investors Protections’ on 25th December,2009 and 4th
January, 2010.
Complaint alleged Sahara group for issuing Housing Bonds
without complying with relevant regulations prompting
SEBI to look into matter.
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Sahara V/s SEBI: Facts Cont’d
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The Whole Time Member of SEBI passed an order dated
23rd June, 2011 directing the two companies to refund the
money so collected to the investors.
Also restrained the promoters of the two companies
including Mr. Subrata Roy from accessing the securities
market till further orders.
Sahara then preferred an appeal before Securities Appellate
Tribunal (SAT) against the order. SAT confirmed and
maintained the order of the Whole Time Member by an
order dated 18th October,2011.
Subsequently Sahara filed an appeal before the Supreme
Court of India against the SAT order.
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Sahara’s Contention
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Issue of Optimally Fully Convertible Debentures (OFCD’s) is
legal.
Issue of OFCD’s is not a public issue.
OFCD are neither shared nor Debentures but “Hybrid” Class
OFCD’s are “Hybrid Instruments” cannot be listed.
Serious error is committed by SEBI.
No statutory requirement to list OFCD’s.
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Sahara’s Contention (Cont’d)
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Bonds issued by Sahara are:Hybrid instruments as per Sec 2(19A) of the Companies
Act.
Convertible bonds as per Sec 28(1)(b) of the SCRA and
hence not listable securities as per Sec 2(h) of the SCRA.
SEBI contention is incorrect and has no credible evidence.
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SEBI’s Contention
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OFCD was a public issue
OFCDs were transferable securities
Violation of section 73 of Companies Act 1956
Untrue Red Herring Prospectus
Not following The Securities Contracts (Regulation) Act,
1956
The forms issued by two companies did not enclose an
abridged prospectus
Did not submit Balance Sheet and P&L a/c to the concerned
ROC
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SEBI’s Contention (Cont’d)
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Aggrieved Sahara appealed to SAT (Securities Appellate
Tribunal).
Passed order in favor of SEBI.
Aggrieved Sahara again moved towards Supreme Court
Finally, Supreme Court of India passed the judgement in
favor of SEBI.
Ordered Sahara to repay the investors.
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Factual Summary
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Sahara aggrieved against the notice of SEBI moved to
Allahabad High Court and obtained a stay.
SEBI filed the petition to Supreme Court.
Recall of the earlier order
Allahabad High Court rejected the recall order.
SEBI again approached the Supreme Court
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Issue of fresh notice to Sahara by SEBI.
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Confirmation of violation of rules and regulations and
therefore, order against Sahara was passed
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Observation by Supreme Court
The supreme court of India interpreted provisions of the
Companies Act, SEBI Act, Securities Contract (Regulations)
Act, 1956 (SCRA), and other related rules to give decisions
after considering some issues.
Issue 1. Whether the power to investigation and
abjudication lies with SEBI in this matter as per Sec 11,
11A, 11B of SEBI Act and/or Ministry of Corporate
Affairs (MCA) under Sec 55A of the Companies Act.
Observations of SC:
 SEBI does have power to investigate in this matter.
 SEBI Act is a special legislation bestowing SEBI with special
powers to investigate and abjudicate to protect the
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interests of investors
Observations by Supreme Court
(Cont’d)
Issue 2. Whether the hybrid OFCDs fall within the
definition of “Securities” within the meaning of
Companies Act, SEBI Act and SCRA so as to vest SEBI
with the jurisdiction to investigate and adjudicate.
Observations of SC:
 OFCDs issued by the two companies are in the nature of
“hybrid” instruments but it is “Security” within the
meaning of Companies Act, SEBI Act and SCRA.
 Although the definition of “Securities” under section 2(h) of
SCRA does not contain the term “hybrid instruments” but it
is inclusive definition and covers all “Marketable Securities”.
 OFCDs were offered to millions of people hence it is
marketable.
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Observations by Supreme Court
(Cont’d)
Issue 3. Whether the issue of OFCDs to millions of
persons is a Private Placement and not covered by SEBI
Regulations and various provisions of Companies Act.
Observations of SC:
 The issue of OFCDs is not private placement since made to
50 or more people [sec 67(3)]
 The Supreme Court observed as the companies elicited
public demand for the OFCDs through issue of Information
Memorandum which is only meant for Public Issues.
 Actions of both the companies clearly depicts they wanted
to issue securities to public in the grab of private placement
to bypass various laws and regulations.
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Observations by Supreme Court
(Cont’d)
Issue 4. Whether listing provisions under sec 73 is
mandatory for all public issues or depends on ‘Intention
of the Company’
Observations of SC:
 Law is clear and unambiguous as to any issue made to
more than 49 persons is mandatory to list [u/s 67(3) of
Companies Act, 1956]
 Sec 73(1) casts obligation on every company intending to
make offer securities to public to list its securities.
 Intention cannot override Act.
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Latest of the Case
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SEBI has began process of refund to investors being
verified by it
Refund is being made from Rs. 5,120 crore deposited by
Sahara
Non genuine investor details are provided by Sahara, many
of which are fake
Refund of estimated amount of Rs. 24,000 crore
SEBI is demanding personal asset details, bank a/c of
Subrata Roy
SEBI has demanded arrest of Subrata Roy
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Conclusion
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The landmark judgement by Supreme Court is a mildstone
in India’s corporate Landscape
SEBI has absolute power to investigate into the matters of
both listed companies and unlisted companies
It vests SEBI to investigate into any matter concerning the
interest of the investors even if it pertains to companies
which are not listed
Removes grey areas relating to issue by so called unlisted
companies
Forbids such unlisted companies to take advantages of
legislative loopholes
Jurisdictional gap is removed between MCA and SEBI in
matters of public interest
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Bibliography
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www.mondaq.com
www.business-standard.com
www.slideshare.net
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