Sahara Group Faces Supreme Court Scrutiny Over Fundraising Schemes
The Supreme Court of India posed uncomfortable questions to the counsel for the Sahara group of companies on Monday, pertaining to its appeal against the ban on its recent fundraising schemes.
Background
- The Securities and Exchange Board of India (SEBI) had initially barred two Sahara group entities and their promoters from raising funds.
- The Allahabad High Court later upheld this order, dealing a blow to the Sahara group.
Supreme Court's Directives
- Guidelines and Agent Disclosure: The Supreme Court directed Sahara India Real Estate Corporation to present the guidelines for investor application to its debenture schemes, along with a list of employed agents, by Thursday.
- Clarity on OFCD: The Chief Justice, S H Kapadia, expressed confusion over the concept of Optionally Fully Convertible Debenture (OFCD), the instrument through which the firm claimed to be raising funds. Counsel Soli Sorabjee was unable to provide a clear explanation, prompting the court to question how rural investors could be expected to understand it if legal experts did not.
SEBI's Stance
- Non-Compliance: SEBI demanded detailed information on scheme applicants, issuing a stop-order due to Sahara's non-compliance.
- Public Advertisement: Sahara protested SEBI's public advisory warning investors away, alleging it tarnished their reputation and aided competitors.
Judicial Precedent
- The Allahabad High Court had previously rejected Sahara's plea regarding OFCD schemes floated by Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd.