SEBI gets SC nod to probe Sahara's OFCD scheme

The Supreme Court today asked the Securities & Exchange Board of India to carry on with its probe into the fund-raising instruments used by two Sahara Group companies.

Under the SEBI scanner is Sahara's optionally fully convertible debenture (OFCD) scheme. Sahara and SEBI have been at loggerheads for over eight months, with Sahara claiming the instruments are private placements and are thus out of SEBI's jurisdiction.
But the apex court today dismissed Sahara's claims, saying investors may not have any knowledge about these products and might feel cheated, as in the Harshad Mehta scam of the early 1990s.

"Why are you (Sahara) afraid? Let SEBI give its judgment. It is an expert body. We want to know what are OFCDs," said a three-judge bench headed by chief justice S H Kapadia while empowering the market regulator to proceed with its probe.

It observed that investors were not aware of this investment scheme and later they might feel cheated, as was the case with Harshad Mehta securities scam that took place in 1990s. The bench mentioned that the scheme is meant for rural people, who may be least aware.

However, the bench said any order passed by SEBI in the case would not be operational till the court gives further direction on it. "We want to see the order of SEBI on OFCD," it said.

The court also allowed the Allahabad High Court to proceed with its hearing of a case where the Sahara group has challenged SEBI's direction to give details of its investors.