SC directs Sahara to make full refund

Objections of Sebi & investors' body brushed aside in OFCD case speculation on more legal tangles ahead

The Supreme Court on Wednesday directed two Sahara group companies to refund Rs 24,000 crore to investors in a bond scheme it had declared illegal on August 31.

The two are to give a demand draft of Rs 5,120 crore immediately and the rest in two instalments. The first instalment of Rs 10,000 crore shall be paid in the first week of January. The amount will be deposited with the Securities and Exchange Board of India (Sebi).

The second instalment shall be paid in February, according to the order passed by a three-judge bench, chaired by Chief Justice Altamas Kabir. According to the August judgment, the deadline for repayment to around 30 million depositors expired on November 30. Therefore, the court expressed deep displeasure at the delay in Sahara’s action.
 

LEGAL GAVEL

• SC raps Sahara group firms for not complying with Aug refund order on OFCD scheme 
• Sahara firms to hand over Rs 24,000 crore to Sebi in instalments
• Amount not clearly specified for final instalment in Feb
• Sebi and investors' association contest judges' decision but are brushed aside

However, Wednesday's order was passed amid protests from Sebi and an investor protection group, which asserted they were not fully heard. Sebi strongly opposed Wednesday’s order, as the main judgment was delivered by another bench and only that one could modify it, it said. A contempt of court petition was also pending there. The main judgment was delivered by a bench of judges K S Radhakrishnan and J S Khehar. Though this issue was raised on Monday before the CJI’s bench, it was not accepted. The CJI responded that his bench was passing the order in the best interest of the investors.

When senior advocate Arvind Datar, appearing for Sebi, raised the issue again on Wednesday and wanted the court to record his objection, the CJI said: “We will record what we feel to record. We cannot record what you say.”

Counsel for Universal Investors Association, Vikas Singh, argued that as the court had given an assurance that its order was to protect the investors, it was unfair to pass an order without hearing it. The bench did not heed the request and dictated the order.

Since the exact amount in the second instalment due in February has not been specified, it was speculated outside the courtroom that this might lead to further uncertainty or more legal haggling. The calculation of Sebi might differ from the claims admitted by the two companies, Sahara India Real Estate Corporation and Sahara Housing Investment Corporation. Since there are millions of small investors, the voluminous documents have to be obtained and examined by Sebi.

The regulator has already complained that the Sahara companies were not forthcoming on the data. It also alleged that investors were being asked to change their investments in OFCD, the scrapped scheme, and invest the money in other schemes of the Sahara group. The further speculation is that the amount collected from the investors might have already been utilised for other projects.

Sahara earlier committed to filing all the documents by November-end, the deadline for payment. The court had appointed one of its retired judges, B N Aggarwal, to supervise the implementation. He is said to have complained that the companies failed to hand over the relevant documents.