MCA refuses to intervene in Sebi-Sahara case

The Ministry of Corporate Affairs (MCA) today washed off its hands from the ongoing dispute between Sebi and Sahara Group companies, which has been restrained by the market regulator from mobilising funds from the public.

In a statement, the MCA has clarified that Sahara Prime City intended to go for an IPO and had filed information about its group companies to Sebi in its Draft Red Herring Prospectus.

Further, Sebi upon noticing inadequacy in material disclosures had asked information about some Sahara Group companies as per its disclosure requirements.

However, the information was not furnished by November 11, 2010, and Sebi passed an interim order issuing show cause to two Sahara Group companies -- SIRECL and SHICL -- and restraining them from mobilising funds from the public.

"This order has been challenged by the said companies and the case is now sub judice before the Hon'ble High Court of Allahabad, Lucknow Bench. As this is a matter between the Sahara Group companies and Sebi, the MCA cannot intervene in the matter," the MCA said.

The MCA added that in order to check misuse of private placement provisions under the Companies Act, 1956, issued a circular dated 22 November, 2010 mandating its field offices to carefully scrutinise offer documents filed by Unlisted Public Companies proposing to raise money through the private placement route.

Besides, it is working on to substitute Unlisted Public Companies ( Preferential Allotment) Rules, 2003 by replacing it with Unlisted Public Companies (Preferential Allotment) Rules, 2011, which would require more disclosures and keeping the securities in demat form.

Also, it said checks and balances, coupled with stringent penalty provisions have been built into the Companies Bill to prevent misuse.