In an example of how the market regulator has multiple proceedings on the same issue, the Securities and Exchange Board of India (SEBI) has imposed penalties of Rs12 crore on two Sahara group firms for an issue going back to 2008-09. A whole decade after the pathbreaking supreme court (SC) order of August 2012 in the Sahara twin companies case, SEBI has imposed penalties on Subrata Roy Sahara and three others—Ashok Roy Choudhary, Ravi Shanker Dubey and Vandana Bharrgava for violating regulatory norms in the issuance of optionally fully convertible debentures (OFCDs) in 2008 and 2009.
Under SEBI’s latest order, Sahara Commodity Services Corporation Ltd and Sahara Housing Investment Corporation Ltd, the twin realty companies, need to pay the fines jointly and severally within 45 days. It is clear that Sahara is in no position to pay, but there is no further action against Subrata Roy or the company, despite cases and interventions filed in various courts including the SC.
The case pertains to issuance of OFCDs) by Sahara India Real Estate Corporation Limited (SIRECL), now known as Sahara Commodity Services Corporation Limited, and Sahara Housing Investment Corporation Limited (SHICL) to raise a 'sizeable amount' from the public in contravention of the provisions of the SEBI Act between 2008 and 2009. The matter had come to light when group firm Sahara Prime City had filed its offer document with SEBI in 2010.
“Clearly, when the noticees falsely represented that the OFCD issue was a private placement of securities, they deprived the investors of the various measures of investor protection which were available to them under the delegated provisions of the Companies Act…and the ICDR Regulations,” the SEBI order said.
As on 31 March 2021, SEBI had recovered Rs15,473 crore out of Rs23,000 crore from SHICL and SIRECL, respectively, the order further stated.
The two companies had issued the OFCDs during 2008 and 2009 period, allegedly, in contravention of the provisions of the SEBI's ICDR (Issue of Capital and Disclosure Requirements) Regulations and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.
SEBI found that SIRECL and SHICL raised money through public issue of securities by issuing the OFCDs without following the various procedures intended to protect the interest of the investors, in respect of public issues, prescribed under the norms.
Further, SEBI said the subscription towards the OFCDs was solicited by the two entities—SIRECL and SHICL—from the general public throughout the country, without adequately informing them about the risks involved in the instruments (OFCDs), or the risks attached to the issuing companies or risks attached to the project for which the capital was being raised.
"Therefore, I conclude that the two companies i.e. SIRECL and SHICL and their promoter/directors have issued the OFCDs in a fraudulent manner in order to induce gullible investors to subscribe to such OFCDs, thereby violating the provisions of... the PFUTP Regulations," SEBI's adjudicating officer Suresh B Menon said in the order.
Also, the entities did not comply with the orders and summons issued by the regulator.