SC issues notices to Sahara firms in OFCD case

Asks why contempt proceedings should not be initiated against it for not returning money to investors in accordance with its order

The Supreme Court on Wednesday issued notices to two Sahara group companies for not complying with its order to return the money collected through bonds from lakhs of middle class investors.

Rejecting the objections of senior counsel Ram Jethmalani, counsel for the Sahara group, it was asked to explain in four weeks why contempt of court action should not be taken against the companies, which floated the optionally fully convertible debentures.

Jethmalani submitted before a bench consisting of Justice K S Radhakrishan and Justice J S Khehar that the court gave only ten days to hand over documents regarding the bond scheme to the Securities and Exchange Board of India (Sebi), and the order was complied with. He reiterated that 127 trucks loaded with over 3,300 cartons containing the applications and related bond documents from over three crore investors were given to Sebi.

Counsel further said the companies have deposited Rs 5,120 crore by way of demand draft with Sebi. That leaves only Rs 2,620 crore outstanding against the firms, according to him. However, the court rejected his opposition to issue of notice for contempt action.

The judges observed that Sebi had not taken action against the firms though their judgment of August 2012 had clearly delineated what the regulator could do. “You have not taken any serious action, only issued notices,” the judges remarked, and lightheartedly asked “who is committing contempt?” They said the judgment allowed Sebi to freeze the accounts of the companies, but it was not done. They asked Sebi to explain next time the status of the action taken by it to execute the order of the court.

Counsel for Sebi, Pratap Venugopal, submitted that the two companies, Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd, had flouted the order of the court repeatedly. Even after getting an extension of date to comply with the orders, the companies have continued to disobey the order. He said execution petition has been filed in a Mumbai court and procedures under the Sebi Act have been initiated. The judges said the judgment had laid down the action Sebi could take but the securities market regulator had failed to take that course.