The Supreme Court on Thursday directed market regulator Sebi to look into the optional fully convertible debentures (OFCDs) issued by the Subrata Roy-led Sahara Group.
?We are of the view that on the question of OFCD, it requires the decision of Sebi. Let Sebi hear and pass an order,? the court said while hearing a case related to the OFCDs issued by Sahara India Real Estate Corporation and Sahara Housing Investment Corporation.
The court said that investors might not have proper knowledge about the product and could get cheated as in the Harshad Mehta scam that rocked the country in 1990s.
However, the bench headed by Chief Justice SH Kapadia restrained Sebi from making the order operational till it gave further directions on the issue.
The order came despite senior counsel Abhishek Singhvi, appearing for Sahara, arguing that Sebi had no jurisdiction over the issue. ?Why are you afraid? Let Sebi give its judgment. It is an expert body. We want to know what are OFCDs,? the court said.
The court also sought to know from Sahara the law under which it was operating the OFCD schemes. Singhvi, who also had on his side senior counsel Soli Sorabjee and CA Sundaram, tried to explain the OFCD scheme, but the judges were not satisfied and said: ?Till today, I do not know what is OFCD. We want to know on what basis you were calling for investment in OFCD. How can some investors know? We want SEBI to decide.?
To find the nature of OFCDs, the court repeatedly asked the Sahara Group to make available their brochure and other relevant information that they were giving to their investors through their agents.
However, Sahara failed to convince the court. Sebi in November last year had barred the firms from mobilising funds from the public till further directions. The regulator had also barred promoters, Subrata Roy and Ravi Shankar Dubey, among others, from soliciting money from the public till further order.
Sebi regulations mandate a company to be listed if the number of private placements exceeds 50. Sahara has about 67 lakh investors.
The apex court has also allowed the Allahabad High Court to proceed with the hearing of a petition by the Sahara Group against Sebi?s direction to produce details about its investors.
Earlier, the apex court has allowed Sebi to seek any information ?which it deems fit, including the names of the investors who have invested in the OFCD in the course of the inquiry.?
Sahara had moved the apex court against the high court’s April 7 order that refused to vacate its earlier order allowing Sebi to seek information.
