Sebi bans Rs 40,000 cr Sahara issues

At the same time,Sebi also forwarded its interim order to the Ministry of Corporate Affairs for appropriate action for any violation of the Companies Act by the two unlisted companies.

Reacting sharply to the order that questions attempts to raise Rs 40,000 crore by the two entities,Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation (SHIC),a Sahara spokesperson termed the Sebi action as “wrong”.

Citing legal opinion from former Chief Justice of India Justice A M Ahmadi and C Achuthan,presiding officers of Securities Appellate Tribunal and other legal luminaries,he said in a statement,”All these opinions clearly stated that this matter is not under the jurisdiction of Sebi…The order is very unreasonable and arbitrary.”

The two companies were raising Rs 40,000 crore through issuance of Optionally Fully Convertible Debentures (OFCDs),whereas only about Rs 27,000 crore was raised collectively in the entire capital market by 60 companies during two years ending 2009-10,Sebi said.

“This is a fit case where in the interest of investors there is a clear imperative to lift the corporate veil and identify the individuals behind the solicitation of funds.

“Needless to say,it would be an indefensible failure on the part of Sebi if it were to allow investors to be imperilled…,” it said.

The matter came to light when Sebi was examining complaints alleging non-disclosure of fund raising by two Sahara entities in the draft papers for the proposed IPO of Sahara Prime City.

Pending the investigations,Sebi called for immediate action to protect investors and barred the two companies and its promoters from directly or indirectly from raising money from public. It,however,gave them 30 days time to avail of an opportunity of personal hearing or inspect the relevant document.

In its statement,Sahara said that it had earlier written to Sebi “where it is clearly mentioned that this OFCD matter is definitely outside the jurisdiction of Sebi and we have given them clear opinions that it’s a Ministry of Corporate Affairs matter.”

Asserting the need for its intervention for the safety of funds of the investors,Sebi said if unchecked it would lead to ‘further unbridled’ solicitation of money without complying with the statutory requirement.

Questioning Sahara’s contention that the funds were raised through private placement involving less than 50 persons,the order said as per the information given by SIRECL it had raised Rs 4,834 crore.

Going by the company’s argument the average subscription per person for the debenture would come to Rs 98.84 crore if there were only 49 contributors.

“Such subscription even from high networth investors are not clearly the norms for even public issues of huge size,” the Sebi order by whole-time member K M Abraham said,adding that it was highly unlikely that the offer was made to less than 50 persons.

“The companies have deliberately not provided the information pertaining to the issues. It is crucial to probe how the companies could have raised huge amount of money running into thousands of crores without conforming to prudent disclosure norm that govern public issues…

“It may require detailed scrutiny of the balance-sheet of Sahara Group to examine the flow of funds in and out of the company. Prima facie it appears that in the guise of private

placement,these companies are rampantly tapping huge public

money by not disclosing the source of funds by circumventing

the applicable framework of law,” it said.

Pointing to the role of promoters including Subrata Ray,

the order said prima facie violations have taken place with

the connivance of the promoters.