Sebi directs Sahara group, its chief Subrata Roy to refund Rs 141 bn

The Securities and Exchange Board of India (Sebi) has barred Sahara India Commercial Corporation (SICCL), its chief Subrata Roy Sahara and 13 other persons from dealing in the securities market for a period of four years, directly or indirectly, for allegedly breaching securities norms by raising money from the market through optionally fully convertible debentures (OFCDs).

The capital market regulator has also directed Sahara India, SICCL, Roy to refund Rs 141 billion along with 15 per cent interest from the date of this order, till the expiry of 4 years from the date of completion of refunds to investors.

In its 54-page final order, the regulator has restrained all the 15 persons from associating themselves with any listed public company which intends to raise money from the public, or any intermediary registered with Sebi for a period of 4 years from immediate effect.

“Subrata Roy Sahara, O P Shrivastava, J B Roy and others are directed not to, directly or indirectly, access the securities market, by issuing prospectus, offer document or advertisement soliciting money from the public and are further restrained and prohibited from buying, selling or otherwise dealing in the securities market, directly or indirectly in whatsoever manner, from the date of this Order, till the expiry of 4 years from the date of completion of refunds to investors as directed..” Sebi’s whole-time member Madhabi Puri Buch said in the order.

Roy, along with other directors were also asked to provide a full inventory of all their assets and properties, and details of all their bank accounts, demat accounts and holdings of mutual funds/shares/securities, if held in physical form and demat form.

Further, the Sahara group entities have been directed to issue a public notice in two newspaper detailing the modalities of refund within 15 days.

Sebi undertook an analysis of the information received, to ascertain whether SICCL had made any public issue of securities without complying with the provisions of the Companies Act and the Sebi Act.

“It was observed that SICCL had made an offer of OFCDs in the financial years 1998-2009 (referred to as “Offer of OFCDs”) and raised an amount of at least Rs 141 billion from at least 1,98,39,939 allottees. As per the prospectus, the issue remained open from July 6, 1998, till June 30, 2008, order noted.

Citing the Supreme Court order, Sebi has permitted Roy and SICCL to sell the assets of the company for the sole purpose of making the refunds and deposit the proceeds in the Sebi-Sahara refund account. Such proceeds shall be utilised, with the permission of the Apex Court, for the purpose of making refund/repayment to the investors of SICCL.

The regulator has been making a refund to investors of OFCDs in Sahara’s two unlisted firms - Sahara India Real Estate Corporation and Sahara Housing Investment Corporation- who are claiming their money after the verification.

"Sahara India ("arranger"), is a partnership firm belonging to the Sahara Group with Shri Subrata Roy shown as Managing Partner, in the partnership deed received from UP Co-operative Bank, which firm has acted as "arranger" to the issue and facilitated the issue as Merchant Banker without being a registered intermediary resulting in the violation of Section 12 of the SEBI Act, 1992 read with SEBI Merchant Bankers Regulations read with Clauses with ICDR Regulations," Sebi said.

Sebi also asked the entities as to why appropriate directions including "directions to refund the money solicited and mobilised through the prospectus issued with respect to the impugned OFCDs with interest, directions to prohibit the company, its promoters and directors and Sahara India from accessing the capital market etc., should not be issued against them".

All the involved parties were given the opportunity to file their replies and indicate whether they desired to avail themselves an opportunity of personal hearing.