'Another Sahara firm faces regulatory action'

Sebi counsel tells SC that MCA has initiated prosecution proceedings against officials of the firm

The Securities and Exchange Board of India (Sebi) on Wednesday told the Supreme Court that Sahara India Commercial Corp Ltd (SICCL), a Sahara group firm registered in Kolkata, is facing regulatory action for not sharing details of its debenture issue, amounting to thousands of crores of rupees.

The Supreme Court is currently hearing an appeal by two other Sahara group firms — Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Invest Corp Ltd (SHICL) — against an order by Sebi directing the two companies to refund money raised through the issue of optionally fully-convertible debentures (OFCDs) to over 30 million investors.

In their appeal, the Sahara firms had cited the example of SICCL, which had raised money through OFCDs, beginning 1998. This issue was not challenged or held illegal by Sebi or the Ministry of Corporate Affairs (MCA), which encouraged the group to follow the same route for the above two firms, the Sahara counsels argued.

In response to this, Arvind Datar, counsel for Sebi, said the SICCL issue commenced before 2000, when a provision to Section 67(3) of Companies Act, which makes the issue of shares and debentures to 50 persons or more a public issue, came into existence.

He further added that SICCL was not a great example to follow since the company and its officials were facing proceedings for alleged violations.

Datar said, “In a letter to Sebi on June 2011, the MCA said that SICCL has refrained from furnishing the details of the number of investors in its OFCD issue. It has also not filed the final prospectus of this issue.”

As of the last balance sheet filed with the Registrar of Companies, Kolkata, where this company is registered, it had outstanding OFCDs of Rs 6,922 crore under the head ‘unsecured loans’, Datar said.

Datar added that MCA has initiated prosecution proceedings against officials of the company for alleged violations.

In its arguments, Sebi said by virtue of the amendments brought in the Companies Act in 2000, all issues of capital made to 50 persons or more would be considered public issues. And, all public issues would fall under Sebi’s jurisdiction and be regulated by it as well.

Sebi’s counsel also repudiated arguments forwarded by Sahara under sections 55A, 60B, 81(1)(a), 73 of the Companies Act. These sections deal with the jurisdiction of Sebi, information memorandum filed in public issues, preferential allotment of shares and listing of shares in stock exchange, respectively.