SEBI Vs Sahara - 5 things you need to know

A quick snapshot of the SEBI vs Sahara battle so far

1) What is the case all about? 
 

Between 2008 and 2011, two unlisted Sahara group companies (SCSCL and SHICL) raised around Rs 18,000 Cr issuing OFCDs (Optionally Fully Convertible Debentures) to roughly 30 million shareholders. In 2011, SEBI ordered the group to refund this money to investors with 15% annual interest. This order was upheld by the Supreme Court. 

2) Why did SEBI ask Sahara to refund the money? 
 

SEBI asked Sahara to refund investors because it felt Sahara was raising money in violation of capital raising norms and certain sections of the Companies Act. SEBI found that under the garb of an OFCD the company was running an extensive parabanking activity without conforming to regulatory disclosures and investor protection norms pertaining to public issues. 
 

3) What did Sahara do? 
 

Sahara challenged SEBI’s order saying the capital markets regulator did not have any jurisdiction over the group companies since they were not listed. The court dismissed Sahara’s petition, also hauling it up for not complying with its orders. 
 

4) What orders did Sahara not comply with? 
 

The court directed Sahara to furnish details of the OFCDs it had issued including subscriptions and refunds within 10 days and submit these to SEBI. It also gave Sahara 90 days to deposit roughly Rs 24,000 Cr. SEBI which was given powers to freeze Sahara’s accounts, attach properties etc. Sahara has repeatedly missed deadlines to comply with the Supreme Court’s orders. It claims the total money due is only Rs. 5,200 Cr, as the balance amount has already been repaid. SEBI meanwhile, told the court that while it had begun the refund process; it couldn’t trace many of Sahara’s investors as details submitted by Sahara were not in the prescribed format, with addresses and other details missing in some cases. 
 

5) What has the court done today? 
 

Since Sahara hasn't been able to deposit the Rs. 24,000 Cr amount with SEBI, the Supreme Court has asked Sahara India to submit a bank guarantee for Rs. 20,000 Cr before October 28th which is the date for the next hearing of the case. Sebi had earlier rejected Sahara’s offer to secure the difference (between Rs 5,200 and 24,000) through immovable property entrusted with a bank trustee.