Double Trouble for Sahara at the Supreme Court and RBI, After Encashing Securities

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The Sahara group’s endeavours to climb out of the legal soup and garner the amount necessary for posting Subrata Roy’s bail, met with another setback on Tuesday when the Supreme Court asked the group’s representative to render an explanation with respect to the encashed securities deposited with the Reserve Bank of India. The Court raised questions over the fact that the group diverted the amount garnered from encashing these securities in order to pay depositors; all without the Court’s formal permission. The depositors were paid approximately 484 crores.

Creating more problems for the group, the top court also granted the Reserve Bank, permission to take action against Sahara India Financial Corporation Ltd (SIFCL), an NBFC. The cause of action for the said petition would be the alleged breach of Reserve Bank’s norms. The breach was allegedly caused because the Sahara India (partnership firm) had cashed securities and did not deposit the consequent amount in the SEBI-Sahara refund account as directed by the Reserve Bank of India.

Earlier, the bench led by Justice T.S. Thakur had restrained the Sahara Group from selling or transferring the assets (directed securities) of SIFCL. On Tuesday, the bench wanted to know the reason for diverting the assets (money received) in contravention of the Court’s specific direction on July 4, 2014. The bench, also including Justices AR Dave and AK Sikri, irked at the diversion of funds, observed that the group should have requested for the Court’s permission before selling identified securities. The Court chided the group’s counsel, S. Ganesh observing that the Court had vacated the order against the sale of securities so that the Group may deposit the monies in the SEBI-Sahara account.

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Further, the Court gave direction to the counsel for Sahara, for filing an additional affidavit which is to provide information regarding the recipients, the mode of disbursement of the money. The additional affidavit will include the clarification for distributing the money to depositors without the Court’s permission. The details asked by the Court, are to be submitted to the Court, SEBI, RBI and the amicus curiae via CDs.

The 3 judge bench, however, did not grant any relief to Subrata Roy in the matter concerning an extension for the use of the conference room at the Tihar Jail for negotiating deals in order to gather the funds for securing his bail, by raising funds via the sale of Group’s assets. The bail amount has been set at Rs. 10,000 crore, of which half is to be paid in cash while the other half is to be posted as bank guarantee. The Court had granted Subrata Roy time, till February 20th, for the use of conference room and other such facilities at Tihar jail.

The Bench has given time till March 13 to SEBI and other parties, for replying to Subrata Roy’s plea for extending facilities at Tihar for 2 weeks in order to negotiate a deal with European Bank and Dutch Pension Fund. Also, the Court asked as to why the group is not selling its domestic assets such as Aamby Valley despite being given enough opportunities to arrange the bail money.

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by Siddhartha Singh.