Sebi presses for impounding of Sahara directors' passports

Sahara says direct refunds not expressly barred by court, matter adjourned to August 13

The stalemate between the Sahara group and the Securities and Exchange Board of India (Sebi) hurtled towards the first anniversary of the Supreme Court order on August 31, 2012.

The order had directed the two group firms Sahara India Real Estate Corp and Sahara Housing Investment Corp to refund Rs 24,029 crore collected from some 29 million investors by issuing optionally fully convertible debentures (OFCDs) with an interest of 15 per cent.

The companies have so far paid Rs 5,120 crore claiming this as the net amount outstanding after premature refunds, which it made directly to the investors. On Tuesday, Sebi counsel Arvind Datar emphasized that this claim has been rejected by the court in its earlier orders and pressed for maximum punishment.

“We are 25 days away from the first anniversary of this court’s order. Six months have passed since we passed orders to attach properties and freeze bank accounts. We have tried every single possibility. We have been thwarted at every attempt,” Datar said.

He added that the group must be asked to pay the remaining amount immediately. “By their own admission, Aamby Valley alone is worth Rs 40,000 crore. They should not be heard further if they do not submit the money. If the arguments are not completed today, they must be asked to appear,” the Sebi counsel pleaded.  He also asked for the passports of key officials to be impounded.

Complaining that the group has not submitted any relevant records, Datar said,” I can’t imagine a more blatant, brazen defiance of the order.”

Senior counsel Ram Jethmalani appearing for Sahara India Real Estate began his arguments raising several technical points relating to contempt law. Though the case deals with civil contempt, since it involves punishment by imprisonment, it assumes the character of a criminal proceedings, Jethmalani said. He added that in such cases contempt must be proved “beyond doubt.”

“If the respondent submits facts which may be true, even if the court is not convinced of the truth, the case must be dismissed, he argued. He pointed out that Sahara had submitted an affidavit containing statement of facts “to which there is not a single counter affidavit.”

Sebi has not discharged the burden of proof beyond reasonable doubt, he added.

He also declined that Sahara gave any undertaking and therefore the question of breach of such undertaking and the consequent contempt proceedings did not arise.

The Sahara counsel pointed out how “a person might bona fide misinterpret directions” in the August 31 order. According to him, the August 31 in direction number 2 clearly said that the companies have to submit among other things, the details of refunds of any amount made. Jethmalani read this with the fact that Sebi’s original order which had directed Sahara companies to refund directly to investors saying there was no bar on direct refunds.

To this Judge JS Khehar said, “If you wanted to do that, you wouldn’t have come for appeal.”

After this Jethmalani explained the court how the Sahara group tried to hire 50-60 trucks to transport documents to Sebi office and to this local truck operators said there were not enough trucks available for the next two weeks.

Judge KS Radhakrishnan asked “They should have produced the register – not trucks. Have they maintained a debenture register.”

When Sebi counsel replied in the negative, the judge asked “Has Registrar of Companies taken action for not maintaining register of debentures?” before adjourning the hearing to August 13.