Subrata Roy Sahara case: Money from abroad only after RBI accord, says Supreme Court

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New Delhi | Updated: December 17, 2014 8:19:39 PM

Sahara Group needs to deposit an initial $1.6 billion to secure bail for Subrata Roy, held in Tihar Jail for last 9 months.

Supreme Court deferred a verdict on embattled Sahara Group's plea seeking permission to raise more debt, crucial to secure bail for Subrata Roy. (PTI)Supreme Court defers a verdict on embattled Sahara Group’s plea seeking permission to raise more debt, crucial to secure bail for Subrata Roy. (PTI)

The Supreme Court today said that the money likely to be arranged by Sahara Group from overseas to raise Rs 10,000 crore for the release of its jailed chief Subrato Roy would come into the country only after necessary clearances by RBI.

The court agreed that legal impediments in the transfer of money from escrow account of foreign bank agent requires special permission by competent authority under the Foreign Exchange Management Act (FEMA).

A bench headed by Justice T S Thakur said before the issue of transaction of amount from escrow account was settled, it would not like to pass any order on the issue.

“We do not consider it necessary to pass any direction on transfer of proposed account which exists of third party. Any direction can be passed on satisfaction of SEBI and amicus curiae,” the bench, also comprising Justices A R Dave and A K Sikri said.

The issue came after senior advocate Shekhar Naphade, who is assisting the court as an amicus curiae, submitted that the legal requirement for external commercial borrowing requires clearance under FEMA which has not been complied with by the Sahara Group.

The court was hearing the issue of Sahara seeking its nod for raising ‘junior loan’ of USD 650 million (approx. Rs 3,600 crore) as a part of the scheme to overcome the liability with Bank of China which had lent money to it in purchasing stakes in three overseas hotels, Dream Downtown and The Plaza in New York and Grosvenor House in London.

The bench said certain aspects arising out of the foreign properties have to be verified, specifically the amount likely to be deposited in the SEBI-Sahara refund account.

Sahara also informed the bench that the escrow account has been shifted to Bank of America.

The Bench made it clear that it was not ready to consider any plea to allow Roy to walk out of the jail for some period to arranging money for his bail.

“Let us be realistic you can come out only if you make the payment,” the bench said adding that Roy has to pay Rs 5000 crore and another Rs 5000 crore as bank guarantee.

“We don’t see any change in the circumstances going by the history of the litigation. The balance amount you are unable to arrange for your release. What will happen after you are released for payment and refund to investors,” the bench asked.

However, the bench gave relief to multiple depositors by lifting its earlier order restraining SEBI from reimbursing their amount.

“There is no reason why they should not get back their deposit with interest,” the bench said while giving relief to 2781 such depositors whose credentials were verified by the SEBI and would lead to reimbursement of around Rs 28.10 crore.

The apex court also gave some relief to Sahara Group by agreeing that it should be allowed to operate bank accounts which are in the names of its various companies.

The Bench asked that the Sahara Group to place before it the details of its companies, bank account, amount etc for verification.
It also said there was an order for freezing the assets but there was nothing to hinder its business activities.

The bench, which posted the matter for hearing on January 9, agreed to hear the appeals of Sahara filed against SEBI’s regarding verification of investors.

Sahara’s counsel S Ganesh and Keshav Mohan handed over to SEBI the cheques amounting to Rs 1900 crores relating to sale of domestic properties.
The apex court on December 2 had permitted the Sahara Group to proceed with the sale of four domestic properties, which is likely to fetch Rs 2,710 crore, in its bid to raise Rs 10,000 crore for the release of Roy.

The court had allowed the group to sell properties in Jodhpur, Pune, Chauma in Gurgaon and Vasai in Mumbai after it was satisfied that the transactions were in accordance with its June 4 order.

Ganesh told the bench that there are some problem in selling the Pune property which would likely to fetch Rs 550 crore.

The June 4 order had stated that “such sales are not for a price lower than the estimated value indicated in the statement filed before this Court or the circle rates fixed for the area in which such properties are situated”.

Earlier the court was told that the transactions for these properties would be completed by May 2015 and in the meantime, the purchasers would deposit post-dated cheques in the name of SEBI-Sahara refund account with undertakings that those would be honoured on due dates.

Out of the list of nine domestic properties, Sahara has already sold its Ahmedabad property and has raised Rs 411.82 crores which has gone into the account of SEBI.

Earlier, Sahara Group had approached the court with a fresh proposal for securing release of Subrato Roy.

Roy, who was sent to jail on March 4 this year for non- refund of over Rs 20,000 crore with interest to depositors, was asked by the court to pay Rs 10,000 crore to get bail, out of which Rs 5,000 crore should be paid in cash and rest of the amount in bank guarantee.

Sahara, which earlier had raised Rs 3,117 crore and deposited with SEBI, has told the court that out of nine domestic assets it has now sold an Ahmedabad property and raised Rs 411.82 crores which has also gone into account of the market regulator.

Earlier, SEBI had moved the court seeking its direction to Sahara group to give a time schedule for payment of Rs 47,000 crore to it.

In the application, SEBI had submitted that the group be directed to furnish all details before the court regarding offers it received for its three luxury hotels, which was to be put on sale to raise money to be deposited with it.

The apex court had earlier allowed Roy, 65, to use the conference room in Tihar jail complex to hold negotiations with potential buyers for selling the hotels in New York and London.

Sebi makes fresh bid to find Sahara investors

In a fresh effort to locate Sahara investors eligible for refunds, regulator Sebi has asked bondholders to submit their claims by next month along with necessary proof of their investments.

The latest exercise follows a similar attempt made by the Securities and Exchange Board of India (Sebi) in August, wherein the eligible bondholders were asked to submit their refund claims to the regulator by September 30, 2014.

Sebi said it received 4,900 refund claims during that exercise from the bondholders of two Sahara companies — Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL), which had raised over Rs 24,000 crore from about three crore investors.

“In the interest of those bondholders of Saharas who could not submit their refund claims before the last date, this advertisement is being issued to enable those bondholders to submit their refund claims,” Sebi said in its fresh public notice in this regard.

The Supreme Court had asked Sebi to facilitate refund to the bondholders of the two companies in connection with a long -running dispute involving raising of funds to the tune of over Rs 24,000 crore from investors across the country.

While Sahara maintains it has already repaid more than 93 per cent of the outstanding dues directly to the concerned bondholders and the remaining amount was just about Rs 2,500 crore, it deposited Rs 5,120 crore to Sebi in December 2012 towards the investor refunds as per Supreme Court orders.

A further amount of Rs 3,117 crore was deposited with Sebi by the group in June this year. It is now in the process of selling certain domestic properties to garner funds and deposit the same to Sebi. At least two such property sales have already taken place and a few others are in the offing.

In its latest annual report for the year ended March 31, 2014, Sebi had disclosed having received 3,612 refund applications involving 13,948 deposit accounts till that time in the Sahara matter.

Of those applications, Sebi made refunds in case of 445 applications involving an equal number of deposit accounts for an aggregate amount of about Rs 1.25 crore including interest of about Rs 43.83 lakh. The other applications had deficiencies or fell under either ‘mismatch’ or ‘multiple investment’ category.

The new notice, wherein Sebi has asked the bondholders to submit their refund applications by January 31, 2015, applies to investors holding Real Estate, Abode and Nirmaan Bonds of SIRECL, as also the Multiple, Income and Housing Bonds issued by SHICL, the regulator said.

The investors would need to submit their applications in a prescribed format, along with original bond certificates or passbooks, self-attested copies of identity and address proof and a self-attested copy of the first page of a bank account passbook or a cancelled cheque leaf. The refund amount would be credited to the bank account of the investor, Sebi said.

The regulator also said that the claims relating to any schemes or bonds other than listed by it would not be entertained and returned to the applicant. The income tax will be deducted at source, wherever applicable, unless the application comes with the necessary tax exemption proof.

The one-page application form requires the applicant to fill name, address, contact details, PAN (if available), details of investments and bank account details, among others.

Sebi said it has been refunding money to the Sahara bondholders who have lodged their complaints or claims with it, as per the order of the Supreme Court.

Pursuant to the court directions on July 4, 2014, Sebi had issued similar notices in various newspapers on August 23/24 and on September 5, 2014, while inviting refund claims till the last date of September 30, 2014.

Sebi began the refund process in May 2013, while asking eligible investors to submit their claims. However, the refunds made so far remain minuscule, although the regulator has not so far made public the quantum of all such payments.

Sahara has been maintaining that Sebi should verify the refunds made by it directly and claims to have submitted to the regulator proof for nearly 75 per cent of refunds. It also says that the remaining 25 per cent refund proof is lying in its Mumbai godown to be given to Sebi.

Sahara also contends that bulk of its investors didn’t have bank accounts and other formal financial papers, the details of which have been sought by Sebi.

On the identification on Sahara’s investors, Sebi has contested in the court that addresses of many investors given by Saharas were incomplete as only village name, district and state is given without any house number or street/lane names.

On its part, Sahara has maintained that most investors are from rural India and had no house numbers or street names.

In the new refund application form, Sebi has given a new address format for rural investors, asking only village name, post office, district and state as against additional details like house number and street name for urban addresses.

The bondholder is also required to give an undertaking, attesting the details in application form with signature or a thumb impression, to return the money along with applicable interest if the declaration subsequently proves to be false.

With regard to the refund applications received till the end of last financial year, Sebi had said that it made refund in cases of 445 applications.

“Out of the remaining 3,167 applications, in respect of 424 applications involving 1,683 deposit accounts, certain deficiencies were observed in the applications/supporting documents submitted by the applicants which were brought to the notices of the applicants for their clarification/ rectification, and replies are awaited from them,” Sebi said.

Sebi also could not process 1,260 applications involving 7,159 deposit accounts as these were in multiple investment category, while 92 cases involving 92 accounts did not meet the extant refund methodology adopted by the regulator.

Besides, 1,776 applications involving 4,395 accounts could not be processed because of being ‘mismatch category’.

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