SAT rejects Sahara plea against Sebi order cancelling mutual fund licence

Company granted six weeks' time to approach the Supreme Court

The Securities Appellate Tribunal (SAT) on Friday upheld markets regulator Sebi's order cancelling the registration of Sahara Mutual Fund, saying the latter no longer met the 'fit and proper' criterion for this business.

And, ordered transfer of its operations to another fund house. However, on the Sahara counsel's request, the tribunal granted six weeks to the company, to approach the Supreme Court.

In 2015, the Securities and Exchange Board of India (Sebi) had passed an order against Sahara India Financial Corporation and Sahara Asset Management Company, declaring them not ‘fit and proper’. “They have failed to fulfil the eligibility criteria to remain as the sponsor and asset management company, respectively,” went the Sebi order.

Later, Sahara had challenged Sebi, presenting a 300-page affidavit before the tribunal. SAT, in a 21-page order on Friday, said: “We find no merit in the appeal.”

“The present appeal before us is regarding the fit and proper status of a promoter/director of Sahara India Financial Corporation (Sahara Sponsor), who holds about 80 per cent of its capital and who controls all Sahara group Companies and, hence, on the fit and proper status of Sahara Sponsor to continue as sponsor of a mutual fund in the context of Sebi/Supreme Court orders against (Subrata Roy) Sahara and two Sahara group Companies,” noted SAT.

It states that mutual fund regulations say the sponsor company and its key managerial persons or key person who controls the company is to be 'fit and proper’. And, that the law empowers Sebi to take actions in the interest of protecting investors. Hence, lifting the corporate veil to the extent of identifying who controls a regulated entity cannot be faulted. The Sahara group has been involved in a legal battle with Sebi ever since the regulator ordered refund of Rs 24,000 crore by two Sahara entities.