Supreme Court refuses to grant more time to Sahara to refund Rs. 24,000 crore

New Delhi: The Supreme Court today dismissed a petition filed by the Sahara group seeking an extension of a deadline for depositing money and documents with market regulator Securities & Exchange Board of India (Sebi). The Sahara group was ordered in August last year to repay the amount raised by what the Supreme Court called “dubious means” from nearly three crore small investors. The amount is to handed out with a 15 per cent interest. The two Sahara firms raised a total of Rs. 2,578 crore in bonds as of April 2011, according to Sahara court affidavits cited by Sebi.In December, the court ordered Sahara to make an initial deposit ofRs. 5,120 crore and another Rs. 10,000 crore in the first week of January 2012 and the remainder in the first week of February with Sebi.

Sahara had sought an extension on this.

Today’s hearing took an interesting turn when M.N. Krishnamani, president of Supreme Court Bar Association, told Altamas Kabir, the Chief Justice of India, who was heading the bench, that it should not hear the case and that the case should instead be sent to the bench which had directed the company to pay around Rs. 24,000 crore to Sebi.

A clearly upset Chief Justice told Mr Krishnamani, “What do you know about this petition? Without knowing even a word how can you say this?”

Mr Krishnamani said he wanted to caution the bench, to which the Chief Justice of India retorted, “We do not need your caution. Please wait for our orders.”

In December, the bench headed by the Chief Justice of India, extended the deadline until February.

The lawyer representing Sahara told the court that the company needed more time to deposit the money and the documents.

“The same plea was put forward before another bench, and was rejected. Now you want relief? We are sorry,” the bench said.

On February 13, Sebi ordered a freeze on the assets and bank accounts of two Sahara group companies, saying they had failed to heed the Supreme Court order to repay investors. According to some media reports, more than 100 bank accounts of the group were affected by the order. The market regulator also ordered a freeze on all bank accounts and properties in the name of the Sahara Group founder, Subrata Roy, and three other directors of the two firms, Sahara Housing Investment Corporation and Sahara India Real Estate Corporation, according to two separate orders posted on the regulator’s website.

The orders escalated the battle between the regulator and the unlisted Sahara. In a statement issued after the Sebi order, Sahara said the directives were based on “old facts” and had not taken into account redemptions it has made since January 2012, adding that its total liability was unlikely to exceed the Rs. 5,120 crore it had deposited with the regulator. It added that the orders for attaching assets of individuals are “incorrect”.

The group also ran a major advertisement campaign in newspapers claiming that “Sahara has nothing to pay (and) rather Sahara shall soon be eligible to take a big refund from Sebi”, and that it was submitting to Sebi the provisional balance sheets of two companies as on December 31, 2012, for more clarity on the matter.

On Friday, Sebi cautioned investors and general public against transacting with the Sahara companies or persons associated with these companies. “Anyone transacting with them (Sahara India Real Estate Corp, Sahara Housing Investment Corp and their three promoters and directors) would be doing so at their own peril,” it said.

Sahara has accumulated a string of trophies in recent years, including a stake in a Formula One motor racing team and ownership of Grosvenor House hotel in London. In July last year, the group bought a 75 per cent stake in the iconic Plaza Hotel of New York. It reportedly paid $575 million (about Rs. 3,000 crore) for the stake.

But its core client base is the towns and villages away from the shiny cities of modern India. There, Sahara sells investment products to often poor people in amounts as small as Rs. 2 a day.

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