Sebi says Sahara Group firms disregarded orders, seeks severe punishment

The Securities and Exchange Board of India (Sebi) on Tuesday told the Supreme Court that Sahara Group's two real estate companies disobeyed three court orders on returning Rs 24,000 crores to investors.

The market regulator said Sahara chief Subrata Roy being a promoter of these companies could not escape the responsibility for the alleged disobedience of the court direction.

"There is a wilful, deliberate and continuous disobedience of the court's three orders" Sebi's senior counsel Arvind Dattar told the apex court bench of Justice K.S. Radhakrishnan and Justice J.S. Khehar.

Seeking initiation of contempt proceedings against Sahara companies and its directors, Dattar said Roy should also be held liable for contempt.

Datar said the company had submitted before the registrar of companies that Roy had significant influence in the day-to-day affairs of the country. "He should be asked to appear before the court," he added.

Sebi said Roy holds 70-per cent stake in the companies which had violated orders of the court. The market regulator said it is a case for imposition of maximum penalty on the companies and its directors. The promoter of the company should be treated on par with the directors, it added.

Dattar contended that the Sahara Group was a single economic entity and Roy was the group's managing karyakarta and he stood at the same footing as other three directors of two Sahara real estate companies and was equally liable for contempt of court.

To rebut the contention that only Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) could be held liable, Sebi pointed out that the red herring prospectus seeking investment had specifically sought investment in the name of Sahara India Parivar.

Earlier, the court sought to know as to how other group companies could be bound by the undertaking by the two companies.

Datar said that keeping in mind the magnitude of funds collected by the companies, it is a fit case for imposing maximum punishment on Roy and the companies.

Sahara counsel Keshav Mohan said: "Sebi referred to a newspaper advertisement as an instance of contempt of court by Sahara. The SC observed that the same does not amount to contempt."

The Supreme Court is hearing three contempt petitions by the market regulator against two Sahara real estate companies, their directors, including Roy, for not complying with the apex court order to return Rs 24,000 crores of the investors that they mopped up through optionally fully convertible debentures (OFCD) in 2008-09.

On August 31, 2012, the court directed the two Sahara companies to return to investors Rs 24,000 crore with 15 per cent per annum interest.

It modified the decision in a December 5, 2012, order and directed Sebi to accept a deposit of Rs 5,120 crore that the market regulator had earlier refused to accept from Sahara companies. The judges also told Sahara to deposit Rs 10,000 crore in the first week of January next year and the balance in the first week of February.

The court had then on February 25, 2013, dismissed the Sahara companies' plea for more time to deposit the money.

The apex court would next hear the matter August 6.