Market regulator SEBI has castigated the Sahara Group for raising thousands of crores in violation of regulatory framework and said that there is a clear “imperative to lift the corporate veil.” Rejecting the contention of two Sahara Group entities and its supremo Subrata Roy that mopping up funds through their debenture issue — OFCDs — was outside its purview, SEBI barred them from approaching the public for raising money till further orders.
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.