Sebi starts huge Sahara refund process

Sends redemption notices, calls bondholders to file original documents, with various proofs in required format

The Securities and Exchange Board of India (Sebi) has begun what could be one of the largest refund operations in history, by sending redemption notices to bondholders of Sahara Housing Invest Corp and Sahara India Real Estate Corp.

The action started on January 9, a day after the Supreme Court dismissed a review petition on its August order directing the Sahara group firms to refund Rs 24,029 crore with 15 per cent interest.

The two companies had raised this money by issuing optionally fully convertible debentures to 29.6 million investors.

These instruments were sold through a million Sahara agents and field workers in the form of housing bonds, abode bonds, etc, between 2008 and 2011. Sebi found these in violation of the rules governing public issues and ordered refunds. The order was upheld by the Securities Appellate Tribunal and later by the Supreme Court.

Several Sahara bondholders have received these ‘notices of redemption’ dated January 9 from the Special Enforcement Cell (SE Cell) set up by the regulator for the purpose. The notices reveal the process Sebi intends to follow in this operation and various documentary and other checks to verify the genuineness of investors.

The notice lists various requirements bondholders need to comply with to get the refund. However, it does not give any schedule for this. Though the notice was based on the details “as per records provided by Saharas”, initial notices have gone to investors who have made complaints to Sebi. The latter is still in the process of sorting truckloads of documents sent by Sahara, most of these in jumbled form. An email seeking comments sent to the Sahara group spokesperson yesterday has not elicited any response.

In the notice, Sebi has asked bondholders to send the original bond documents ‘duly discharged’. Bondholders have to discharge the document by affixing a signature on a revenue stamp. They are also required to fill a bilingual application form (in Hindi/English) giving details of the investments, addresses and bank account. Also, copies of documents in support of identity and address. Sebi will accept a passport, UID, voter ID, driving licence or PAN card as identity proof.

MAKING HISTORY

TIMELINE

• August 31, 2012: SC orders refund of Rs 24,029 crore to 29.6 mn investors
   
• September 10: Deadline for Sahara ends to file documents
   
• November 30: Deadline for completion of refunds ends
   
• January 8, 2013: SC dismisses review petition on August order
   
• January 9, 2013: Sebi sends redemption notices to bondholders

HARDWORK FOR REFUND?

• Application in prescribed ‘Form A’
   
• Original bonds to be discharged and sent to Sebi SE Cell
   
• Certificate of bank account details from bank manager
   
• Investors without bank account to open one with nationalised bank
   
• Form 15G/15H to avoid TDS on interest income
   
• Proof of identity and address to be verified

Source: Sebi notice of redemption

The bondholder is also required to give an undertaking that the details are correct and if any are found to be false in future, Sebi can take the money back with interest. The application form also requires a certificate from the bank in which the investor holds his accounts. If a bondholder does not have a bank account, Sebi has asked the investor to open one immediately with a government-owned bank.

Sebi is also likely to deduct tax at source, wherever applicable, on these payments; it has called for investors to send a Form 15G or 15H in case they want to be exempted from TDS. These are self-declaration forms filled by tax assessees whose interest income is over Rs 10,000 but the total income is less than taxable limits.

“As part of the verification, an authorised representative of Sebi will visit your address, before refunding the money to you. Please produce originals of proof of identity (copies of which are submitted with application) for verification,” the Sebi notice said.

It is not clear how many of the 29.4 million bondholders will be able to comply with these conditions. Sahara has claimed many are from semi-urban and rural areas, not covered by the banking sector and other government machinery.

Even investors with all records in place are unsure if they have to part with the original bond certificates.

“I am not sure if I should. That is the last and only proof of my investment. I tried to check with Sebi how soon would the refund come after submitting the originals. But there was no definite answer,” said a bondholder. “Also, I tried to check why the originals need to be submitted at this stage. Can’t the verification agency check it at my home and deliver refund? But there was no response.”

Sebi has asked the bondholders to send the redemption application and documents to SHCIL house in Navi Mumbai. This is also creating confusion, as to whether the address is an authorised one of Sebi, as there is no official communication to this effect, say bondholders. A Sebi spokesperson did not respond to an email seeking details on the refund process.