Legal Eagles: Stories of the Top Seven Indian Lawyers by Indu Bhan

Author:Indu Bhan [Bhan, Indu]
Language: eng
Format: epub, pdf
Tags: Autobiography, Biography, Business, Economics, Essays, Law, Legal Profession, Literary Collections, Non-Fiction
ISBN: 9788184007190
Google: W-RgCgAAQBAJ
Publisher: Random House India
Published: 2015-08-30T23:00:00+00:00

THE CASE

Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd v. Securities and Exchange Board of India

Judgement delivered by Justices K.S. Radhakrishnan and J.S. Khehar on 31 August 2012

Case Details

This is the most important judgement of recent times, and has been closely watched all over the world.

In a landmark judgement that sent clear signals to corporates to not mess with rules and regulations, the Supreme Court directed the Subrata Roy–led Sahara group companies to refund about Rs 24,000 crore (with 15 per cent interest), collected from 3.3 crore investors within three months. The companies—Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL)—had collected the amount through OFCDs (housing bonds) between 13 March 2008 and 16 October 2009, in violation of the law of the land.

The companies had decided to issue unsecured OFCDs by way of private placements, and filed details in the Red Herring Prospectus with the Registrar of Companies, Kanpur. SIRECL specifically indicated that it did not intend to get their securities listed on any stock exchange. Taking advantage of the loopholes in investment laws, the group stated that the scheme was open to those persons who were associated or affiliated in any manner with the Sahara group. The funds raised by the company would be utilized for financing the acquisition of townships, residential apartments, shopping complexes, etc. Construction activities would be undertaken by the company in the major cities of the country and would also finance other commercial activities or projects taken up by the company within or apart from the above projects. The company decided to carry out infrastructural projects in the country with the money.

According to the documents produced before the court, SIRECL and SHICL had garnered Rs 19,400 crore and Rs 6380 crore, respectively, within a short span of four years from the public through its vast network. The alleged fraud came to light when one Roshan Lal, a public-spirited person belonging to Uttar Pradesh, lodged a complaint with market regulator, SEBI, alleging that the group was issuing housing bonds without complying with rules issued by the Reserve Bank of India and National Housing Bank.

Upon questioning, Enam Securities Private Ltd, the merchant banker that managed the funds, replied on 29 January 2010 that SIRECL and SHICL were not registered with any stock exchange and were not subject to any rules, regulations, guidelines, notifications and directions framed by the regulator. It stated that the bonds were sold adhering to rules under the Companies Act.

After a marathon hearing, the apex court held that the collection of such huge funds by selling the bonds was illegal, and both the companies were asked to return the money.

Roy, who claimed that the Sahara group had Rs 1,50,000 crore in assets, neither obeyed the judgement pronounced on 31 August 2012, nor did he respond to several notices served by SEBI, which then moved the top court and initiated contempt of court proceedings.

On 3 March 2014, sixty-five-year-old Roy was remanded to judicial custody and sent to Tihar Jail.

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