In a move that may spell fresh trouble for the Sahara Group, the Supreme Court on Wednesday issued contempt notices to two of its group companies and its managing director Subrata Roy and three directors for non-compliance of its directions to refund R24,000 crore raised from investors through optionally fully convertible debentures (OFCDs) by November 30 last year.
It also pulled up the Securities and Exchange Board of India (Sebi) for failing to take action against the companies — Sahara India Real Estate Corporation (now known as Sahara Commodity Services Corporation) and Sahara Housing Investment Corporation — as per its August 31, 2012, directions that ordered attachment of properties and freezing of the companies’ bank accounts in case of default.
A bench comprising justices KS Radhakrishnan and JS Khehar gave four week to Sahara to explain why contempt action should not be initiated against it. The court also directed Sebi to file a status report within two weeks detailing what steps it had taken so far in compliance with the directions given to it in August.
Sebi counsel Pratap Venugopal told the bench that the regulator had issued notice to the companies, started proceedings to freeze their accounts and also approached a civil court in Mumbai for execution of the proceedings. However, the regulator doesn’t have powers under the Sebi Act to do so, he added.
Not satisfied by Venugopal’s contention, the bench said that issuing notice was not enough. “You have to execute our order... We have given you powers,” the bench said.
The bench also made it clear that the proceedings pending before it on a contempt plea against the companies would not come in the way of Sebi taking action against the group.
Urging the apex court to initiate contempt and punish the Sahara companies, Subrata Roy and directors Ashok Roy Choudhary, Ravi Shankar Dubey and Vandana Bhargava, Sebi in its plea accused the companies of wilful and deliberate violation and non-compliance of the court’s judgment of August 31 that also asked the companies to furnish documents in 10 days to Sebi to ascertain those who had invested in the OFCDs.
The counsel also told the court that Sahara had failed to comply with the deadline set by another bench headed by Chief Justice Altamas Kabir on December 5, which gave the group time till February 2013 to pay the amount. The Chief Justice’s bench had asked Sahara to pay Rs 5,120 crore upfront and the balance in two instalments — Rs 10,000 crore in the first week of January and the rest in the first week of February.
However, Sahara told the court that it has already paid Rs 5,120 crore, although it was to pay only Rs 2,620 crore, thus having made an extra payment of Rs 2,500 crore “to provide buffer, if there are any miscalculations”.
Senior counsel Ram Jethmalani argued that Sahara on December 10 had sent 127 truckloads of documents, containing more than 31,500 cartons, relating to redemptions made to 3.3 crore investors.
However, the bench asked why it took the companies so long to give proof. “Documents were available with you. You should have handed them over,” Justice Khehar said.