SEBI made a forceful plea to SC to punish Subrata Roy along with his two firms and their directors for not complying with its order for refunding Rs 24K cr to investors. SEBI made a forceful plea to SC to punish Subrata Roy along with his two firms and their directors for not complying with its order for refunding Rs 24K cr to investors.
NEW DELHI: Sahara group chairman Subrata Roy should be punished for contempt along with the directors of two group companies for violating the Supreme Court’s order to return Rs 24,000 crore to the stock market regulator, Sebi’s counsel Arvind Datar has argued in the apex court. on Tuesday
“Subrato Roy cannot escape liability now, saying he was not a director and was only a shareholder,” Datar said during arguments on Sebi’s contempt petition on Tuesday, quoting from documents submitted by Sahara India to the Registrar of Companies to show that Roy owned 70% stake in both Sahara India Real Estate Corporation and Sahara India Housing Investment Corporation.
Roy could, therefore, issue instructions to “directors on how to act, control policy and appoint a majority of directors,” Datar argued. This made him the founder promoter who would “reasonably be party to preparation of the prospectus” on the basis of which the two companies mopped up money from the public, he said.
There were findings to this effect in the Securities Appellate Tribunal (SAT), which had not been disputed either by Sahara India or Roy, Datar argued. “As promoter, he is liable to the same punishment as the other directors,” he said. Datar also spoke of Sahara India as a single economic entity in law that was bound by the law to fulfill the obligations of the other two entities.
But the bench, comprising Justices KS Radhakrishnan and JS Khehar, sought to know the law on the subject. “But the other companies have not given any undertakings,” Justice Radhakrishnan pointed out. Justice Khehar asked, “Each of these are individual companies.
To what extent can we proceed against their assets?” Datar said he would argue this law point later. He, however, insisted that the court could lift the corporate veil to find out whether they were the same entity to ensure that no fraud took place.
These two companies may have given undertakings that their money was invested in the other Sahara companies, but the other companies, which are part of the same entity, can easily pass resolutions facilitating the payment, he said. The market regulator also contended that the directors of the two companies and Roy were guilty of “willful disobedience” of the court orders dated August 31 and December 5, 2012, to return the money.
Narrating the sequence of events, Datar said that Sahara has failed both to give accounts and also make the payment of Rs 24,000 crore. The company had all along been repaying the money collected from investors in violation of the court order to hand it over to Sebi, he charged. Datar said the company never told the court that it was under pressure from investors to repay, and that it is now claiming that only a small amount remains to be paid.
To cover that, the company had submitted Rs 5,120 crore by way of a draft and was demanding the excess back from Sebi after adjustment of refunds, he contended. “The order to deposit money has not been complied with.
The entire attempt has been to sidetrack,” he said. “This is a fit case for punishing for contempt.” The Contempt of Courts Act prescribes a maximum punishment of six months and a fine. “The magnitude of the amount collected makes it a fit case for imposing maximum penalty for contempt on the company and its directors,” Datar said.
The two companies had also told the top court that the entire money had been invested in other Sahara companies and were safe, Datar pointed out. But when Sebi issued notices for attachment of these properties and bank accounts, the company did not produce any, he argued.
The market regulator contended that the companies have not complied with apex court orders passed on August 31, December 5 last year on the issue of refunding the amount.
During the argument, the bench asked whether the amount can be recovered from other companies of the group.
SEBI contended that action can be taken against other companies as the money collected were invested in other companies of the group which is being headed by the same promoter.
The court was hearing three contempt petitions filed against Roy, the two firms and their directors who will present their case on the next date of hearing on August 6.
The apex court had on August 31 last year directed the Sahara group to refund the amount by November end. The deadline was further extended and companies were directed to deposit Rs 5120 crore immediately and Rs 10,000 crore in first week of January and remaining amount in first week of February.
The group, which had handed over the draft of Rs 5,120 crore on December 5, has failed to pay the rest of the amount, SEBI told the court.
The apex court had on August 31 last year directed the two Sahara group companies to refund the money to their investors within three months with 15 per cent interest per annum. It had also said that SEBI can attach properties and freeze bank accounts of the companies if they fail to refund the amount.
The two companies, their promoter Roy and directors Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary were told to refund the collected money to the regulator.
(Economic Times/Times of India)