Sahara: Twice In Contempt; No Action!

The SEBI-Sahara battle keeps making headlines; week after week. In the last 5 months two different Supreme Court benches have, in no uncertain terms, told Sahara to pay up over Rs 20,000 crores to SEBI so that the regulator can refund the money to Sahara’s verified OFCD investors. When Sahara did not submit documents within the deadline laid out by the August 31st order, SEBI filed a contempt petition but it hasn’t made any headway. In the interim, Sahara managed to get the Chief Justice’s bench to give it extra time to submit documents and pay up. According to the December 5th order, Sahara was to pay the 2nd instalment of 10,000 crore to SEBI by January 7th. It missed that deadline. That puts Sahara in contempt of two Supreme Court orders. The question is what happens now?

Sajeet Manghat and Payaswini Upadhyay report Submit investor documents in 10 days and refund their money in 3 months – That was the landmark judgment passed by Supreme Court Justices Radhakrishnan and Khehar against two Sahara group companies in August last year.
But Sahara failed to meet the first deadline; prompting SEBI to file a contempt petition. Last week the securities regulator informed its Board of the other actions it has taken since August 31st.
- SEBI approached NABARD, the Enforcement Directorate, the Central Economic Intelligence Committee, RBI and the Financial Intelligence Unit seeking additional information on the two Sahara companies
- SEBI also wrote to all banks seeking account details of the Sahara Group and its promoters. Sahara won a stay in the Calcutta High Court but it was short-lived.
- SEBI also asked the Depositories for information on Sahara’s demat account holdings
- It also asked the 2 Sahara companies for a full list of assets 
And while its contempt petition pended the market regulator initiated proceedings against the 2 Sahara companies and their promoters for not furnishing information and not complying with SEBI’s directions. It also filed a case before the Additional Chief Metropolitan Magistrate, Mumbai alleging Sahara violated the Companies Act.  Prashant Bhushan
Senior Advocate
“I find from the Board note of SEBI that they had asked the Financial Intelligence Unit for information about Sahara. Now I have with me a report of the FIU dated 30th Mar 2012 given to the government of India about Sahara which mentions not only more than a dozen foreign bank accounts but also the movement of literally thousands of crores of rupees from one account to other. Now all these accounts should have been frozen by now unless either the FIU did not share this information with SEBI or SEBI did not move to freeze these accounts.” ‘The Firm’ has not verified the information in the FIU letter The August 31st Supreme Court judgment empowers SEBI to seize Saharas’ assets if the two companies violate the terms of the order. And though its contempt petition has been languishing for 4months SEBI has done nothing. It faced another setback when Sahara succeeded in getting the August 31st order modified. On 5th December a bench headed by Chief Justice Altamas Kabir granted Sahara another 15 days to submit the documents and up to February 7th to refund the money in instalments. Starting December 10th, Sahara sent SEBI 127 trucks containing 31669 cartons filled with application forms of over 3 cr investors and over 2 cr redemption vouchers. The documents were delivered at a Stockholding Corporation of India warehouse in Mumbai. But the full consignment never came. SEBI stopped accepting documents on the 20th when the deadline expired...Sahara admitted that 25%  were yet to be submitted and asked for time up to 20th Feb 2013. Not only did all the documents not arrive; those that did were all mixed up. SEBI says 
- There was no computerised list of all the bondholders, nor of refunds made
- Application forms and repayment vouchers of different bonds had been hopelessly mixed with each other.
- There was no clear segregation between application forms where refunds have been made and those outstanding
- And key documents critical for verification process were missing. As SEBI started sorting through the pile Sahara went back to the Supreme Court in an attempt to modify even the second Supreme Court decision. Prashant Bhushan
Senior Advocate
“It’s obvious that Sahara is trying every trick in the trade to somehow wriggle out of the binding judgments of the Supreme Court. To that end they have also moved an extraordinary petition before a co-ordinate bench virtually challenging and seeking modification of a final judgment of a co-ordinate Bench of the Supreme Court which is totally illegal and without jurisdiction. Unfortunately the SC entertained that and gave them some respite. Emboldened by that, they have now moved further applications seeking reduction of the amount that they are supposed to pay back. It is obvious therefore that they have no intention of paying this money.” This week Sahara missed the deadline to pay the second instalment of 10,000 crore rupees. That adds up to two instances of contempt! Prashant Bhushan
Senior Advocate
“SEBI must now immediately move to freeze all these accounts which are mentioned in this Financial Intelligence Unit’s letter dated 30th March to the government of India as well as attach all their properties and start recovering the money from their properties. And they should also file a fresh contempt petition in the Supreme Court.” Earlier in the week Justice Radhakrishnan and Justice Khehar dismissed Sahara’s review petition saying their August order had no inconsistency in it. In short every day there are new developments in this case. 4 months have passed since the 1st SC order and Sahara has coughed up just 5000 crore rupees.  SEBI is now contemplating a fresh contempt petition and an execution petition to enforce the Supreme Court order. Two orders and yet no closure to this case! In Mumbai, with Sajeet Manghat, Payaswini Upadhyay