Appellate Tribunal rejects Sahara India’s appeal; upholds SEBI’s action
The matter pertains to Rs.14,106 crore optionally fully convertible debentures
While upholding regulatory action against Sahara India Commercial Corporation Limited (SICCL) by the Securities and Exchange Board of India (SEBI), the Securities Appellate Tribunal (SAT) has dismissed the company’s appeals.
Sahara India and its directors had approached SAT regarding the alleged illegal issuance of optionally fully convertible debentures (OFCDs).
The matter relates to SEBI’s October 2018 order, directing the company to refund the amount raised through debentures, disclose details of its inventory, and barring certain officials from accessing the securities market.
The three-member SAT bench has now ruled that the OFCDs issued by SICCL between 1998 and 2008 constituted a public offer that was within the regulator’s jurisdiction.
It added that SICCL mobilized Rs.14,106 crore from 19.8 million investors through debentures. Thus, as claimed by the company, the funds could not be treated as a private placement.
The bench noted that following amendments to the Companies Act in 2000, any offer made to 50 or more persons was deemed a public issue. It necessitated compliance with listing and disclosure norms applicable to public offerings.
While rejecting Sahara’s submission that most funds had been repaid to investors, SAT noted that the company failed to provide credible evidence of the repayments. It added that a certificate by a chartered accountant was not enough to establish that 20 million investors had received the funds.
The judges maintained SEBI had not delayed in initiating action against Sahara, as immediately on receiving inputs from the Ministry of Corporate Affairs, the regulator began its probe.
Though SAT dismissed the appeals by the company and its directors, the tribunal allowed a separate appeal filed by certain managers and the company secretary. It held that, as employees, they could not be held liable for the company’s misadventures.