MCA turns heat on Sahara over OFCD conversion

Asks Sahara India Real Estate to explain conversions into Q Shop by December 31

The Ministry of Corporate Affairs (MCA) has initiated an enquiry calling for detailed explanations from Sahara India Real Estate Corporation (SIRECL) for converting money raised by issuing optionally fully convertible debentures (OFCD) into advances against goods in another group firm Sahara Q Shop Unique Products Range Limited.

The move came after three investors Amitabh Thakur, Nutan Thakur and Ashish Verma filed complaints with the ministry and market regulator Sebi alleging forced and unilateral conversions in violation of Supreme Court order directing the company to refund OFCD money to investors. Business Standard has reviewed a copy of one of these complaints.

In a letter dated December 21, the ministry acting through the Registrar of Companies, Kanpur, directed the company to furnish, “your parawise clarification/ explanation to the allegations raised by the complainants along with documentary evidence within ten days.” The letter further said if the company fails to do so, "necessary penal action under relevant provisions of the companies act will be initiated". Business Standard has reviewed a copy of this letter.

The ministry wanted to know whether any approval under Section 297 was obtained by the company for agreement with Sahara Q Shop for conversion of bonds. It also sought details of terms of such conversion and whether the prospectus filed provides for "utilisation of bond amount for purchase of goods of Sahara Q Shop".

MCA also has asked whether the Supreme Court order provides for conversion of bonds instead of refunding the amount.

An email questionnaire sent to Sahara group spokesperson remained unanswered at the time of going to press.

Nutan Thakur told Business Standard that, "the Sahara group was forcibly and unilaterally converting bonds and other investments in Sahara India Real Estate and Sahara Housing Invest to Sahara Q Shop without any consent of the investor in defiance of the orders of the Supreme Court. We had lodged complaints to both Sebi and the Registrar of Companies. We have received a letter from Roc Kanpur that they have given 10 days for giving explanation."

In August, the Supreme Court had directed Sahara India Real Estate and Sahara Housing Invest to refund over Rs 24,029 crore raised from 29.6 million investors along with 15% interest. It had given Sebi three months time to execute these refunds.

However, on November 30, when the deadline for refunds expired, Sahara moved the Supreme Court seeking permission to submit Rs 5,120 crore as the outstanding. The chief justice has directed the group to deposit a further Rs 10,000 crore by early January and the ‘remaining amount’ by February.

However, Sahara group claimed in subsequent newspaper advertisements that it had an outstanding of Rs 2,620 crore only against investors of OFCD. It further claimed that the remaining Rs 2,500 crore it has submitted was a buffer amount to account for any differences or disputes.