The Securities Appellate Tribunal (SAT) has upheld the 2018 order of Sebi (Securities and Exchange Board of India) which directed Sahara India Commercial Corporation (SICCL) and its directors to refund about Rs 14,106 crore to investors.
The amount was raised through optionally fully convertible debentures (OFCDs) from nearly 1.98 crore investors. The Appellate Tribunal’s order said that the fundraising constituted a public issue which was in violation of securities laws.
The tribunal dismissed appeals filed against the Sebi order by the company and its directors. The Sebi order had also asked the company to disclose details of its inventory and debarred certain officials from accessing the securities market.
The three-member SAT bench on Monday ruled that the OFCDs issued by SICCL between 1998 and 2008 constituted a public offer. This brought them within Sebi’s regulatory jurisdiction.
The company had claimed that the amount raised should be treated as a private placement. However, the tribunal said that such a large-scale mobilisation of funds from millions of investors could not be treated as a private placement.
It said that as per the amendments to the Companies Act in 2000, any offer made to 50 or more persons would be deemed a public issue. Hence, the company’s fundraise was required to comply with listing and disclosure norms applicable to public offerings.
The tribunal said that the company did not seek permission from stock exchanges. Neither did it obtain necessary regulatory approvals from Sebi. Hence, the securities markets regulator had the jurisdiction to regulate the issue and take enforcement action.
While the company claimed that most of the investors’ money had already been returned, the tribunal noted that it could not provide credible evidence of the same.
The company had submitted a chartered accountant’s certificate as proof of refunds, which the SAT found insufficient.
The tribunal also rejected the company’s claims that it suffered from Sebi’s delayed action. It said that the time taken was reasonable considering the large number of investors involved in the fundraise.
