Sahara simply sent trucks loaded with documents
of investors to SEBI in a highly messed up condition.The investigation raised
the question of legitimacy of most of these investors .In an effort to trace the investors, SEBI dispatched letters to addresses provided
by Sahara but, a good lot of them were returned with “address not found” and
only a very small %  responded.1 Shalini,2013.The investigation found
that the such important information about investors were not properly
maintained and created doubt about the genuineness of the documents. For instance, In the case of an investor Kalawati , even the basic information  like the names of her father or husband  was not mentioned on the documentrelated to her. Her address didn’t  include a number, street or locality. The
name of her agent was given as Haridwar.The Supreme Court was perplexed  at some of these incomprehensible gaps.1 Tamal,2012The Sahara group, however, claimed that there were no
fictitious investors
and charged
that SEBI was making “baseless allegations” against it and accused it
of not accepting “60 truckloads of documents”, while the regulator
countered these charges by saying that the documents given by them were
“hopelessly mixed up”. The process also brought into light that there
was a large number of  small investors
who had invested their hard earned money with a hope of future security i.e. ‘ “My wife had an accident some
years  back I don’t have much
savings, so I thought I’ll be able to save some money by putting in a small
amount every month,” said Chaudhary, an office helper at a construction company
in Uttar Pradesh state.’2  Reuters. 2012. 

The Supreme
Court in its judgment of August
31, 2012  gave directions to  SEBI to attach properties of the group to
recover the money .Thus, the court was firm  in taking action for flouting its
directions.  The apex court also barred
Roy from leaving the country

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SEBI again went to the Supreme Court contending non-
compliance by the group to the court orders. Consequently, the apex court
issued another order on December 5, 2012, and ordered the concerned companies
to deposit the money in three instalments starting  with an immediate payment of Rs 5,120 crore.  The
company  no doubt refunded Rs. 5,120
crore but it
failed to meet the deadline for further payments and claimed that more than Rs
20,000 crore have already been paid  directly to the investors. SIRECL and
SHICL, along with  Roy faced contempt
proceedings in the apex court before another bench which on February 6,2013  permitted SEBI to take
action against the group by freezing its 
accounts and seizing its   properties for flouting court orders   by
not refunding the money to investors .On February 13, 2013,SEBI
passed orders, to attach bank accounts and other properties of the group and
later issued summons to Mr Roy and other three members of board of directors to
appear  before it. Roy and others
appeared before SEBI on April 10, 2013. 
In the intervening time, there were full-page advertisements by Sahara
group , in newspapers claiming that they have cleared bulk of their outstanding
liabilities to bond  holders.

SEBI also cautioned general public and investors
through public notices in newspapers, against dealing with Sahara group. The
regulator asked banks and other financial institutions to freeze the accounts
of the group.It also wrote to district collectors . The other  concerned authorities also received message
from  SEBI  for attachment of land, real estate and other
properties. The Tax department was also warned against the two companies.

The Income tax
department became more active. In an interrview to a representative of Outlook,
it told that  the
group’s ‘ stubborn refusal  to
divulge  even the basic information is
vexing the Revenue department. According to the department, the group
deliberately “attempted to thwart inquiry and investigation by continually
non-cooperating with IT authorities.” The IT department sees the group
companies as a “facade” and a “corporate veil” and finds
the whole business as one gigantic money-laundering operation.’ 3.Sahara
was non cooperative with the media as well. Despite recurring endeavours

by Outlook , Sahara ‘refused to disclose  financial details. No balance sheets, no
annual reports, no supporting figures.’1 “There
seems to be an unstated resolve on the part of the two companies not to part
with data in any meaningful manner. The thrust seems to be on concealment and
obfuscation rather than openness and transparency.”2

Between Sebi and Sahara &
Observations of Supreme Court3 .Deepika V. Sawhney and SouvikMukherjee ,2012 :

 During the
whole process there were arguments from both the sides . where  apart from arguments between the two, the
Supreme Court’s observations are also important to note:

Time Limit :SEBI
argued that Sahara violated rules of companies Act 1956. The whole process of
issuing OFCD should be completed within 10 days but Sahara continued  such process for more than 2 years.The two companies were listed with the Registrar
of the company only, while they were supposed to be registered with SEBI. SEBI ,giving
reference to various sections of law ,like   Section 55A ,Section 67(3) and Section 73(1),
argued that since Sahara had made an offer of OFCDs to more than forty nine
persons, so the requirement for listing became mandatory for two companies of
Sahara group. Sahara group defended themselves by saying that listing requirement
under Sec 73 of Companies Act is not mandatory and applies to those companies
only who “intend to get listed”. To compel a  company to get listed on a stock exchange is
a violation of corporate autonomy. It also argued that under the provisions
of 2003 rules ,there is no statutory requirement to list OFCD on any recognized
stock exchange .The Supreme Court rejected this contention on the
ground that if any issue of securities is made to more than 49 persons as per
Sec 67(3) of the Companies Act, the intention of the companies to get listed
does not matter at all and Sec 73 (1) is a mandatory provision of law which
companies are required to comply with

ne 24th 2014)



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