WTM/PS/32/SEC/FEB/2013. Case: In Re: Sahara India Real Estate Corporation Ltd. Vs. Securities and Exchange Board of India
| Case Number | WTM/PS/32/SEC/FEB/2013 |
| Judges | Prashant Saran, Whole Time Member |
| Issue | Companies Act, 1956; Income Tax Act, 1961 |
| Judgement Date | February 13, 2013 |
| Court | Securities and Exchange Board of India |
Order:
Prashant Saran, Whole Time Member
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SIRECL had issued Optional Fully Convertible Debentures [hereinafter called "the OFCDs"] to the tune of Rs. 19,400 crores approximately as on 13.04.2011 (as mentioned in SIRECL's affidavit dated 4.01.2012 filed before the Hon'ble Supreme Court). As various illegalities were committed in the issuance of the OFCDs, the Securities and Exchange Board of India [hereinafter "SEBI [WTM"] initiated proceedings against SIRECL and upon conclusion of the same, the SEBI [WTM] found that SHICL and SIRECL contravened, inter alia, the provisions of the Companies Act, 1956 and SEBI Act, 1992 apart from the Regulations framed and Guidelines issued under the latter Act and by its order dated 23.06.2011 directed SIRECL to refund the money collected under the Red Herring Prospectus (RHP) to all such investors who had subscribed to their OFCDs, with interest.
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Shri Ashok Roy Choudhary, Shri Ravi Shankar Dubey and Ms. Vandana Bhargava are the directors of SIRECL and Shri Subrata Roy Sahara is the promoter and holds 70% shares in SIRECL as well as SHICL. These directors and Shri Subrata Roy Sahara were also made jointly and severally liable to refund the said money collected, through the RHP, from the investors.
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The said order was confirmed by Securities Appellate Tribunal [hereinafter referred to as "SAT"] in appeal on 18.10.2011. The appeals filed by the SIRECL and SHICL were dismissed by the Hon'ble Supreme Court, by its order dated 31.08.2012, recording a categorical finding that there was no illegality in the proceeding initiated by SEBI as well as in the aforesaid order passed by SEBI [WTM] and as upheld by SAT. However, the Hon'ble Supreme Court modified the directions given by SEBI [WTM] and endorsed by SAT and passed the following directions:
1. Saharas (SIRECL & SHICL) would refund the amounts collected through RHPs dated 13.3.2008 and 16.10.2009 along with interest @ 15% per annum to SEBI from the date of receipt of the subscription amount till the date of repayment, within a period of three months from today, which shall be deposited in a Nationalized Bank bearing maximum rate of interest.
2. Saharas are also directed to furnish the details with supporting documents to establish whether they had refunded any amount to the persons who had subscribed through RHPs dated 13.3.2008 and 16.10.2009 within a period of 10 (ten) days from the pronouncement of this order and it is for the SEBI (WTM) to examine the correctness of the details furnished.
3. We make it clear that if the documents produced by Saharas are not found genuine or acceptable, then the SEBI (WTM) would proceed as if the Saharas had not refunded any amount to the real and genuine subscribers who had invested money through RHPs dated 13.3.2008 and 16.10.2009.
4. Saharas are directed to furnish all documents in their custody, particularly, the application forms submitted by subscribers, the approval and allotment of bonds and all other documents to SEBI so as to enable it to ascertain the genuineness of the subscribers as well as the amounts deposited, within a period of 10 (ten) days from the date of pronouncement of this order.
5. SEBI (WTM) shall have the liberty to engage Investigating Officers, experts in Finance and Accounts and other supporting staff to carry out directions and the expenses for the same will be borne by Saharas and be paid to SEBI.
6. SEBI (WTM) shall take steps with the aid and assistance of Investigating Authorities/Experts in Finance and Accounts and other supporting staff to examine the documents produced by Saharas so as to ascertain their genuineness and after having ascertained the same, they shall identify subscribers who had invested the money on the basis of RHPs dated 13.3.2008 and 16.10.2009 and refund the amount to them with interest on their production of relevant documents evidencing payments and after counter checking the records produced by Saharas.
7. SEBI (WTM), in the event of finding that the genuineness of the subscribers is doubtful, an opportunity shall be afforded to Saharas to satisfactorily establish the same as being legitimate and valid. It shall be open to the Saharas, in such an eventuality to associate the concerned subscribers to establish their claims. The decision of SEBI (WTM) in this behalf will be final and binding on Saharas as well as the subscribers.
8. SEBI (WTM) if, after the verification of the details furnished, is unable to find out the whereabouts of all or any of the subscribers, then the amount collected from such subscribers will be appropriated to the Government of India.
9. We also appoint Mr. Justice B.N. Agrawal, a retired Judge of this Court to oversee whether directions issued by this Court are properly and effectively complied with by the SEBI (WTM) from the date of this order. Mr. Justice B.N. Agrawal would also oversee the entire steps adopted by SEBI (WTM) and other officials for the effective and proper implementation of the directions issued by this Court. We fix an amount of Rs.5 lakhs towards the monthly remuneration payable to Mr. Justice B.N. Agrawal, this will be in addition to travelling, accommodation and other expenses, commensurate with the status of the office held by Justice B.N. Agrawal, which shall be borne SEBI and recoverable from Saharas. Mr. Justice B.N. Agrawal is requested to take up this assignment without affecting his other engagements. We also order that all administrative expenses including the payment to the additional staff and experts, etc. would be borne by Saharas.
10. We also make it clear that if Saharas fail to comply with these directions and do not effect refund of money as directed, SEBI can take recourse to all legal remedies, including attachment and sale of properties, freezing of bank accounts etc. for realizations of the amounts.
11. We also direct SEBI (WTM) to submit a status report, duly approved by Mr. Justice B.N. Agrawal, as expeditiously as possible, and also permit SEBI (WTM) to seek further directions from this Court, as and when, found necessary.
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SIRECL failed to comply with direction no. 4 aforementioned as it did not submit any of the documents enumerated thereunder to SEBI within the period of 10 days as required under the said direction to enable SEBI [WTM] to ascertain the genuineness of the subscribers as well as the amounts deposited. Under direction No. 6, SEBI [WTM] was required to verify the genuineness of the subscribers and the amount deposited by them with the aid and assistance of the persons enumerated thereunder in case the documents would have been submitted in accordance with direction no. 4. According to direction no. 7, if upon verification of the documents aforementioned, SEBI [WTM] found that the genuineness of the subscribers was doubtful, he was required to give an opportunity to SIRECL to establish their genuineness. Under direction no. 8, in case the SEBI [WTM], after verification of the details furnished, was unable to find out the whereabouts of all or any of the subscribers, then the amounts collected from such subscribers were liable to be appropriated to the Government of India. As mentioned...
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