Financial Express, 7/1/11
Market regulator SEBI warned investors that two Sahara Group companies have been raising funds without its approval and said it will not be able to redress any complaint in this regard.
The regulator, in a public notice, said investors of Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) should take investment decision at their own risk.
"SEBI will not be able to provide redress to any investor on any complaint in connection with these OFCDs (Optionally Fully Convertible Debentures)", the notice said, pointing out that the two companies have not sought regulatory approval from SEBI for raising funds.
The two Sahara group companies have been raising funds through OFCDs, which Sebi said "were not issued in compliance with the applicable Sebi regulations.
Advising the investors to make investment decision into SIRECL and SHICL after taking into account "facts and circumstances" of the case, SEBI said they should "also note that the OFCDs are not proposed to be listed on any recognised stock exchange". No immediate comments can be obtained from the Sahara Group.
The Sebi notice further said that SIRECL has already raised Rs 4,843.37 crore from the investors as on June 30, 2009, as per the accounts filed with the Registrar of Companies and the cost of the projects of the two companies are estimated at Rs 20,000 crore each.
"SEBI is of the view that the OFCDs issued by these two companies is a public issue and has not been done in compliance with the applicable requirements of the Companies Act, 1956 and the SEBI’s regulations relating to public issue", the notice said. SEBI’s regulations on public issue prescribes eligibility criteria for accessing public.
As the OFCDs were not issued in compliance with the applicable regulations, SEBI in its November 24 order had restrained the two companies and their promoters and directors including Sahara supremo Subrata Roy from raising funds through OFCDs till further directions.
The Sahara Group of companies, however, challenged SEBI’s order in the Lucknow bench of the Allahabad High Court. The Court in its interim order on December 13, 2010, stayed the operation of the SEBI order with liberty to the regulator to proceed with the inquiry. Later, SEBI filed a petition in the Supreme Court, challenging the order of the High Court.
The apex court in its order on January 4, 2011, held that SEBI could call for any information including the names of the investors who have invested in OFCDs from the companies in the course of the inquiry undertaken by it.
"The counsel for the companies submitted that they agree to give information that SEBI will call upon them without prejudice to the rights and contentions in the pending matter", the notice said.
The apex court also directed the High Court to proceed with day-to-day hearing of the case beginning January 12. SEBI and RoC were also directed to file their affidavits by January 7.