Court says group has to pay Sebi first, regulator will take call on whether refunds were made properly based on documents
NEW DELHI: Business Standard reported that The Supreme Court today asked two Sahara group companies whether they were prepared to give a bank guarantee for Rs 20,000 crore. The two firms have been asked to respond by October 28. In August 2012, the court had directed the firms to deposit Rs 24,029 crore raised by selling bonds to some 29.6 million investors along with interest of 15 per cent with the market regulator. But the companies have so far paid only Rs 5,120 crore.
The court’s observations came during the hearing of a contempt petition filed by the Securities and Exchange Board of India (Sebi). The move created flutters in the Sahara camp in the courtroom as submitting a bank guarantee would entail a deposition of 100 per cent margin money with the bank. If the group decides against giving the guarantee, then contempt proceedings will continue.
Sahara tried to offer alternatives, but Sebi was not keen. Sebi rejected Sahara’s offer to secure the difference amount through immoveable property entrusted with a bank trustee. “Either they have to sell their assets and deposit the money in a bank account or give a bank guarantee for the entire amount,” said Arvind Datar, Sebi counsel, adding, that the regulator doesn’t have the manpower or machinery to handle the assets, documents or third party.
Datar added, “I have been dealing with the group for the past four years. It is not a group playing cricket.” He recalled how the group has not given even a single original document requisitioned by Sebi in the last several months. “Not a single request has been complied with. They claim they have assets are now worth Rs 60,000 crore. The dues are only one-third,” the Sebi counsel said.
Sahara’s offer for a bank trusteeship deal came when the court pinned the group by hinting that much short of contempt, the group officials can be detained till the order is executed. Judge JS Khehar referred to a 1960s judgement where “the detention could continue till the execution of order.” Khehar’s bombshell came after Ariamma Sundaram, counsel arguing on behalf of Sahara chief Subrata Roy Sahara pointed out how he is not liable for contempt citing legal provisions and rules. “We will find a way out,” Khehar said.
Judge K S Radhakrishnan added, “Umpteen opportunities have been given. After going through the facts fully we have fixed the time. The lawyers who were there when the main matter was argued are not here. Even the amount was fixed based on your affidavit. Nothing beyond the affidavit.” The judges expressed displeasure about how the group has been dragging the matter for years now.
Sundaram tried to explain that the group has already repaid most of the sum directly to the bondholders and it was not the court’s intention that the investor be paid twice. He argued that court is putting cart ahead of the horse by asking the companies to pay the entire sum.
Khehar explained the effect of the original order in three simple steps. “One, Pay back the whole amount to Sebi. Two, give all the documents. Three, let Sebi decide what should go to investors, what should go back to you and what should go to the government. So, the horse has always been ahead of the cart.”
During the course of hearing, it was indicated by the judges that they were not interested in punishing anyone, prime objective is to ensure that the order passed by the Court is implemented.
“The Court indicated that Saharas should attempt to purge the contempt and enquired as to what Saharas can offer in this regard. It was indicated by Mr. Sundaram that Saharas can provide immovable assets as security, which can be held by nationalised bank in trust. He also stated the said lands can be sold by bank if any deficit is arises and monies shall be paid to Sebi as per directions of the Court,” the Sahara group said in a statement.
Sahara firms raised Rs 24,029 crore from 29.6 million bondholders
In August 2012, Court ordered firms to pay the entire sum to Sebi
Sebi was to pay investors after checking credentials
Sahara paid only Rs 5,120 crore to Sebi; told refunded rest directly to bondholders
Court wants Sahara to pay full amount to Sebi
(Sourced from Business Standard)