SC refuses to free Sahara's Subrata Roy from custody

The Supreme Court Wednesday declined Sahara Group chief Subrata Roy's plea for release from jail along with his two other directors.

The trio were taken into custody March 4 for non-compliance of Aug 31, 2012, order to return investors' money that Sahara's two real estate companies - Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL)- had collected through optionally fully-convertible debentures (OFCDs) in 2008-2009.

"We understand, but nothing has changed," said the apex court bench of Justice T.S. Thakur, Justice Anil R. Dave and Justice A.K. Sikri as senior counsel Rajeev Dhavan urged the court to "kindly consider their release till February 2015".

Telling the court that Roy and his two directors Ravi Shankar Dubey and Ashok Roy Choudhary were already in custody for about ten months, Dhavan urged the court to "let him come out in house arrest".

The apex court by its March 26, 2014, order had asked the Sahara's two real estate companies SIRECL and SHICL to deposit with market regulator SEBI Rs.5000 crore in cash and another Rs.5000 crore in bank guarantees as a part payment of Rs.17,400 crore of investors' money collected by then through OFCDs in 2008-2009. This was also a condition for their release from custody.

The amount of Rs.17,400 crore that the court by its Aug 31, 2012, order had directed to be returned to investors has more than doubled as court by its said order had also held that investors' money would be returned along with 15 percent interest.

While declining Roy's plea for release, the court held back its nod to OSS Life Ltd. taking over the loan liabilities of its three overseas hotels - Grosvenor House Hotel in London and the New York Plaza and Dream New York hotels in New York - from Bank of China.

The court asked Sahara counsel S. Ganesh to address the queries from the amicus curiae Shekhar Naphade, who told the court that loan that Sahara was raising from the overseas finances was hit by the provisions of the Foreign Exchange Management Act (FEMA).

Amicus Curiae told the court such foreign loans can only be raised for capital investment or investment in infrastructure projects and not for liquidating debts.

Asking Sahara to address the queries from Naphade, the court permitted the market regulator Securities and Exchange Board of India (SEBI) to seek clarification from Sahara if it so wanted. It directed the further hearing of the matter January 9, 2015.

In the order, the court allowed SEBI to return Rs.28.1 crore to the investors who have multiple deposits with two Sahara entities SIRECL and SHICL.