Sahara Group Ordered to Refund Rs 14,106 Crore Following SAT's Affirmation of SEBI Ruling

Securities Appellate Tribunal Upholds SEBI Order Against Sahara India Commercial Corporation

The Securities Appellate Tribunal (SAT) has ruled in favor of the Securities and Exchange Board of India (SEBI), upholding an order directing Sahara India Commercial Corporation Ltd (SICCL) and its directors to refund Rs 14,106 crore raised through optionally fully convertible debentures (OFCDs) from nearly 1.98 crore investors.

According to the SAT, the fundraising constituted a public issue in violation of securities laws. The tribunal held that the company had issued OFCDs to over 1.98 crore people between July 1998 and June 2008, thereby triggering regulatory requirements applicable to public issues.

Key Findings

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• The SAT dismissed appeals filed by SICCL, Sahara India, and several directors challenging SEBI's October 31, 2018 order.
• The tribunal ruled that the offer of debentures could not be treated as a private placement or a domestic arrangement, noting that the number of investors far exceeded the statutory threshold.
• The SAT observed that under the then-applicable provisions of the Companies Act, 1956, any offer made to 50 or more persons must be treated as a public offer, requiring compliance with listing and disclosure requirements.

Rejection of Sahara's Arguments

• The SAT rejected Sahara's argument that SEBI's action suffered from delay, noting that the regulator-initiated proceedings after examining related issues involving other Sahara group companies and receiving an inspection report from the Ministry of Corporate Affairs.
• The tribunal held that the time taken by SEBI to initiate proceedings was not unreasonable, given the complexity of the case and the number of investors involved.
• SEBI also argued that cash repayments were not legally permissible and that the affidavits filed by branch managers related to payments made through Sahara India as arranger, rather than directly by SICCL.

SEBI's Arguments

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• SEBI maintained that it had 'inherent jurisdiction' under the SEBI Act since 1992 to regulate public issues of securities.
• The regulator argued that the 2000 amendment to the Companies Act was clarificatory and that any offer made to more than 50 persons automatically constituted a public offer.
• SEBI also rejected Sahara's claim of private placement, stating that the company failed to produce evidence identifying the targeted investors.