Sahara filed prospectus in the guise of RHP: Sebi

The Securities and Exchange Board of India on Monday argued that the two Sahara group firms actually filed a prospectus to raise money through optionally fully-convertible debentures (OFCDs), though they called it a red-herring prospectus (RHP).

Sahara India Real Estate and Sahara Housing Investment Corporation have challenged at the Securities Appellate Tribunal (SAT) a Sebi order directing them to refund investors the money collected by issuing OFCDs.

Sebi counsel Arvind P Datar said, according to the Companies Act provisions, an RHP did not contain two key points of information — price and quantum of securities — which were present in a full prospectus. “But, the document filed by Sahara India Real Estate indicated the price of securities as Rs 5,000, Rs 6000 and Rs 12,000 for Abode bonds, Nirman Bonds and Real Estate Bonds, respectively. And, the quantum of securities were indicated as Rs 20,000 crore. Therefore, they have filed a prospectus disguising it as RHP,” Datar said.

Datar also disputed the companies’ argument that OFCDs were not marketable securities, as their free transfer was restricted by a clause in the application form.

According to Datar, shares and debentures of a public companies are “freely transferable” under the provisions of Section 111A of the Companies Act and the company does not have powers to limit this transferability, even through a provision in its articles of association.

Datar concluded by asking that the Sebi order be sustained in the interest of the protection of investors, since the matter involved Rs 4,843 crore and at least 6.6 million investors. Ministry of corporate affairs counsel Darius J Khambatta will make his arguments on Wednesday, followed by a rejoinder from Sahara, if any.