Tribunal to take up Sahara plea against Sebi on Tuesday

Petitions by two Sahara group companies, Sahara India Real Estate and Sahara Housing Investment Corp, challenging a Securities and Exchange Board of India (Sebi) order against them, will come up for admission at the Securities Appellate Tribunal (SAT) on Tuesday. The Union ministry of corporate affairs will also be a party.

SAT is expected to hear the case on a continuous basis, since it had been asked by the Supreme Court to hear the petitions and pass an order within five weeks of the appeal. One week has already elapsed.

Senior advocate Arvind P Datar is likely to appear for Sebi, while DSK Legal Advisors are likely to represent Sahara, according to sources. Datar had represented Sebi at the SC when the regulator had challenged an Allahabad high court order earlier this year on the issue. Satish Kishanchandani of DSK had represented Sahara before the media after the latest SC judgement. Neither counsel was available for comment.

On July 15, the apex court had directed the Sahara group to approach the tribunal against the Sebi order, which had asked the two companies to refund money collected by issuing debentures to the public. It had given three weeks for Sahara to appeal and five weeks thereafter for SAT to hear the case and pass an order.

Earlier, in June, in the biggest refund order in its two-decade history, Sebi had directed the two companies to refund at least Rs 6,588 crore collected under their debenture schemes to investors. Sebi had said the schemes were illegal.

Sahara filed its appeal on August 5, arguing that Sebi rules did not apply to the debenture issue, since it did not intend to list.The Supreme Court had directed Sebi to “expeditiously hear and decide this case” on May 12, in the interest of 6.6 million investors in these schemes. Sahara Commodity Services (earlier known as Sahara India Real Estate Corp) and Sahara Housing Investment had started raising money by issuing optionally fully convertible debentures (OFCDs) in March 2008 and September 2009, respectively. According to a filing by one of these firms in November 2009, about Rs 6,588 crore was raised.

Sebi, while going through a prospectus filed by another group firm, Sahara Prime City Ltd, for an Initial Public Offer, found this money raising through OFCDs to be in violation of its public issue norms.

It banned these entities from raising money in November 2010. Sahara had challenged this interim order in the Allahabad HC and later in the SC, leading to the May 12 order by the apex court.

The 99-page Sebi order from member K M Abraham held the Sahara group promoter, Subrata Roy Sahara, and three directors of the said companies, Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, jointly liable for such refund.

In a letter to the Prime Minister, Abraham had later alleged the finance ministry was putting pressure on Sebi to be lenient on some cases, including that of Sahara.