SAT orders Sahara group to refund Rs24,000 crore to investors

In a major blow to the Sahara group, the Securities Appellate Tribunal (SAT) has upheld the Securities and Exchange Board of India (SEBI) June order directing two group companies to refund Rs24,000 crore to 30 million investors.

''Any offer or invitation to subscribe to shares or debentures if made to 50 persons or more shall be treated as a public issue and all provisions of law relating to public issues shall apply,'' ruled SAT. ''The company withheld from the investors / public all the necessary information that is required to be disclosed to them in a public issue. This concealment is indeed very significant and goes to the root of the controversy.''

Sahara India Real Estate Corporation and Sahara Housing Investment Corporation had raised huge sums from its investors. While the former had raised Rs17,656 crore from 22.1 million investors, the latter had raised Rs6,373 crore from 7.5 million investors. The companies had raised the funds through optionally fully convertible debentures (OFCDs) and through what the company claimed was a private placement.

SEBI, however, contested the claim and said it was a public issue as more than 50 investors were involved. The stock market regulator, in its June 2011 order, directed the two companies to refund the entire proceeds of the OFCDs along with 15 per cent interest.

The company filed a plea with the SAT, claiming that it had enough assets to cover the outstanding liabilities. The estimated market value of its investments was over Rs70,000 crore, the companies claimed.

SAT, however, reiterated that the fact that the information about the issue was circulated to more than 30 million investors through a million agents and nearly 3,000 branch offices was tantamount to advertising about the issue.

The tribunal was also critical of the registrar of companies, which allowed the issues. ''We are of the view the RoC while registering the RHP (red herring prospectus) with undue haste had acted in dereliction of his duty,'' pointed out SAT. The tribunal has given the two companies six weeks to repay the money to its investors.

But the group has decided to appeal to the Supreme Court. ''We have decided to go in appeal against the impugned SAT order in the Supreme Court,'' said Abhijit Sarkar, head, corporate communications, Sahara India Pariwar.