Your final 90 days, SC tells Sahara group

If Rs 10,000 cr for chief's bail doesn't come this time, receivership; Sahara to now pledge Aamby Valley land, gets nod to sell other local assets

The Sahara group will now pledge a portion of the land holdings in its Aamby Valley township to raise the Rs 5,000-crore bank guarantee required to bail out its long-jailed chief, Subrata Roy.

The group’s focus has shifted to domestic properties in this regard, on realising its trophies abroad cannot fetch more than $120 million (Rs 700 crore), net of dues to Bank of China. With the Chinese lender objecting to any further leverage on the foreign hotel assets through 'junior loans', Sahara lawyer Kapil Sibal told the Supreme Court (SC) on Monday that the group would try to sell other domestic properties, including a separate 600-acre parcel in Aamby Valley, to raise the remaining cash required for the bail.

The group has so far deposited a little under Rs 3,800 crore in cash, as part of its effort to comply with the bail conditions. It needs another Rs 1,200 crore in cash, apart from the Rs 5,000-crore bank guarantee.

The SC on Monday allowed Roy to utilise a special conference room and Skype facilities within Tihar jail here for the next three months, in what the judges termed his 'final' chance to avoid appointment of a receiver to liquidate the group. The court decided the proposals mentioned here were among the ‘firmest’ Sahara had, as these were supported by memoranda of understanding signed with investors and letters of credit provided by lenders.

The court also allowed the company to explore alternatives. However, it did not allow the group’s request to dispose of some domestic assets at prices 25-40 per cent below the the valuation indicated earlier.

Mirach

In an interesting turn of events, Mirach Capital Group, the Florida-based fund whose dealings with Sahara turned sour after allegations of fraud, fielded P Chidambaram, who has held high cabinet positions, as has Sibal, in the same administration.

Chidambaram said his client wanted to make an outright offer to purchase all three hotels abroad, namely, London’s Grosvenor House, and New York’s Plaza and Downtown.

Though Sibal objected, saying Sahara was not interested in selling, the court allowed Mirach to file an application stating its offer. However, this would come into play only if Sahara’s final attempt failed to materialise and the court decides to appoint a receiver to liquidate the assets.

Sahara plan

According to plans outlined by Sibal in court, the foreign properties would be re-mortgaged to a Spanish bank, Banco Bilbao Vizcaya Argentaria (BBVA), for $975 million. This transaction is being facilitated by a Mumbai-based firm called Nouam Financial Consultants, promoted by one Karan Judge.

Of this, $850 mn would go towards settlement ofthe Bank of China loan and the rest for the Securities and Exchange Board of India (Sebi) repayment account. Sahara filed the memorandum of understanding between Nouam and Aamby Valley (Mauritius), holding company of the foreign properties, and a letter from BBVA to Nouam, confirming the availability of funds, certified as “non-penal origin” and free for investment.

It also presented a letter from HSBC (Bank) to Aamby Valley, giving details of the $820 mn (Rs 5,000 crore) bank guarantee executed against the pledge of 600 acres of land in the township.

Objections

Sebi counsel Arvind Datar raised objections on the bank guarantee provided by HSBC being in the name of Aamby Valley and not in the name of Sebi as required by the bail order. Datar also wanted a letter of consent from the Bank of China, the principal lender that has a claim over the foreign. Datar and amicus curiae Shekhar Naphade were also concerned about the multiple entities in four different countries being involved in the proposed transactions.

For example, “the bank guarantee given by HSBC India was routed through a firm in Panama to another bank in Argentina,” Datar noted. Further, the documents presented by Sahara showed the bank guarantee was drawn in favour of Aamby Valley, whereas the court order requires these to be in favour of Sebi. Naphade also complained that Sahara does not share enough details about the entities it was dealing with.