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Sahara money goes to govt if investors not identified

Amount to be returned with 15% interest per annum retired judge to oversee process

Read more on:    Ofcd | Sebi | Sahara Group
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The Supreme Court has ordered the Securities and Exchange Board of India () to verify the details of subscribers to Optionally fully convertible debentures (OFCDs) submitted by the two firms. If whereabouts of any of the subscribers could not be identified, then the money will go to the Central government, the court has said.

"The Securities Exchange Board of India (Sebi) if, after the verification of the details furnished, is unable to find out the whereabouts of all or any of the subscribers, then the amount collected from such subscribers will be appropriated to the Government of India," judges JS Khehar and KS Radhakrishnan said in their order.

In a first of its kind order, the court ordered refund of over Rs 24,029 crore collected by Sahara india real Estate and Sahara Housing investment Corp by issue of OFCDS to the resepective investors with an interest of 15 per cent per annum.

The refund process has to be completed within a period of three months, the court said.
 
The firms werealso directed to furnish the details with supporting documents to establish whether they had refunded any amount already. Sebi has been directed to examine the correctness of such details furnished.
 
Justice J S Khehar in his remarks expressed that the details of investors submitted were far from satisfactory.  "One would not like to make any unrealistic remark, but there is no other option but to record, that the impression emerging from the analysis of the single entry extracted above is, that the same seems totally unrealistic, and may well be, fictitious, concocted and made up," Khehar said.
The judge observed that, "It seems the two companies collected money from investors, without any sense of responsibility to maintain records, pertaining to funds received. It is not easy to overlook, that the financial transactions under reference are not akin to transactions of a street hawker or a cigarette retail made from a wooden cabin."
 
Pointing out that the case involves contributions which approximate Rs 40,000 crore, allegedly collected from the poor rural inhabitants of India, the judge said, "Despite restraint, one is compelled to record, that the whole affair seems to be doubtful, dubious and questionable. Money transactions are not expected to be casual, certainly not in the manner expressed by the two companies,"
 
The judgement added that "The consequence of the foregoing discussion, if correct, is alarming, shocking and distressing. When the appellant-companies are a part of the Sahara India Group of Companies, recognized in India with awe and admiration, their apparent attempt to withhold the disclosure of the factual position solicited by Sebi, cannot be brushed aside lightly. After all both companies were proceeding on legal guidance right from the beginning. "
 
Key directions:

  • SIRECL & SHICL to refund the amounts collected with interest at 15% per annum within three months
  • The two Sahara companies to furnish details and proof of refunds made already within 10 days
  • If documents not found genuine, then Sebi will proceed as if no refund was made
  • The Sahara companies to submit application forms,allotment details etc in ten days
  • Sebi to refund amount to investors after checking all records
  • If investors cannot be traced, amount goes to Government of India
  • Justice B N Agarwal, retired Supreme Court Judge, to oversee  process
  • Sebi to submit report as early as possible

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