Asks promoter, directors why they shouldn?t be arrested for violating Sebi norms

The Supreme Court on Monday slammed the Sahara Group and its chief, Subrata Roy, for ?manipulating courts? and not cooperating with the market regulator, Sebi. The apex court asked the group, its promoter and two of its directors, to explain as to why they should not be arrested for their failure to refund R24,000 crore collected in 2008-09 from the public violating investor protection norms.

Giving them a week to file their reply, both to the contempt petition filed in December last year and another Sebi application seeking their arrest, a Bench comprising Justices KS Radhakrishnan and JS Khehar pulled up the group. ?Are you supposed to sit and relax when (a) notice is issued to you?? it asked. It also remarked that the group was trying to make the case an ?endless exercise?.

However, the top court granted a week to them to file their reply and posted the matter for further hearing on May 2. On Sahara seeking an extension from SC, Securities Appellate Tribunal and, now, Sebi, the top court termed it ?very strange?. ?What has been happening? You are filing appeals against appeals. Why did you move the Allahabad High Court against Sebi’s attachment order?? it asked.

Earlier on August 31, 2012, the court had asked the two Sahara firms ? Sahara India Real Estate Corporation (SIRECL) and Sahara Housing Investment Corporation (SHICL) ? to refund R24,000 crore raised from investors through optionally fully convertible debentures (OFCDs) by November 30. The Bench questioned senior counsel CA Sundaram, who appeared for the group, as to how the group companies and their directors had approached SAT and the Allahabad HC despite the fact that the SC had delivered its judgment on the investment scam.

The Bench said, ?How can you go to the HC? You are manipulating courts. Attempts are made to overreach orders of this court. We are surprised about what you are doing. We will take it seriously.?

Sundaram said they were forced to approach SAT as Sebi had attached the personal properties of the directors by going beyond the SC verdict. At this, the Bench said Sebi was at liberty to take any action it felt necessary in addition to enforcing its directives.

When Sundaram sought to oppose Sebi?s plea for seizing the passports of Roy and other directors, the Bench said: ?We don?t want Sebi?s application to become infructuous.?

Senior Sebi counsel Arvind Dattar said they were unable to collate the information regarding investors as Sahara had given 127 truckloads of documents, mainly the applications of the three core investors, but said most of these contained incomplete addresses which would not be of any help.

At this, the Bench advised Sebi not to ?go in search of the investors… If the investors approached Sebi, it was fine. Pay genuine investors from the money deposited by Sahara, transfer the remaining funds to the government of India if you do not find genuine investors?. The Bench further said that there was no order allowing the group to refund money on its own to the 3.3 crore investors. ?There was no direction to refund directly. The money was to be given to Sebi, who would refund investors after verifying records…?

?We don?t find the inflow of R24,000 crore? in the account books of the two companies, which had raised the funds in the form of OFCD, Dattar added.

On March 15, Sebi had sought the SC?s permission to ?take measures for (the) arrest and detention in civil prison of promoter of Roy and the two male directors, viz, Shri Ashok Roy Choudhary and Shri Ravi Shankar Dubey, after giving reasonable opportunity of hearing?. It also wanted Roy, and the three directors to deposit their passports and bar them from leaving the country without permission.