SAT directs Sahara Group, directors to deposit Rs. 2000 Cr. for failing to refund sum collected by the issue of OFCDs

Case Details: Sahara India Commercial Corporation Ltd. v. Securities and Exchange Board of India - [2022] 134 taxmann.com 122 (SAT - Mumbai)

Judiciary and Counsel Details

• • Justice Tarun Agarwala, Presiding Officer and M.T. Joshi, Judicial Member
  • Gaurav Joshi, Sr. Adv., Feroze Patel, Satyen Vora, Ankur Kalal, Jigar Shah, Advs. for the Appellant. 
  • Rafique Dada, Kevic Setalvad, Sr. Advs., Mihir Mody, Ms. Sneha Prabhu, Arnav Misra, Mayur Jaisingh, Advs. for the Respondent.

Facts of the Case

In the instant case, Sahara India Commercial Corporation Ltd (Hereinafter referred to as “Appellant”) filed an appeal before Securities Appellant Tribunal (SAT) against the order passed by the recovery officer.

SEBI passed an order in October 2018, whereby the appellant and its then directors were asked to jointly and severally refund Rs. 14,106 crores collected through issuance of Optionally Fully Convertible Debentures (OFCDs) including the application money collected from investors pending allotment of securities along with interest of 15 per cent per annum.

The appellants were further restrained from accessing the securities market till four years from the date of the refund and from associating with any public entity.

Then recovery officer issued a notice of demand directing appellants to deposit a sum due within 15 days, failing which recovery would be made. Since no amount was paid, the recovery officer issued an attachment order in October 2021 directing banks to attach bank accounts and Demat accounts, among others, of appellants.

Appellants filed an appeal and contended that while the matter was already pending for hearing before the tribunal, an attachment order was issued in haste, and the recovery officer should have awaited the result of the appeal instead of attaching bank accounts of the company and its directors.

Appellants further contended that the Company had a monthly expenditure from which salaries to employees, taxes to the government, and other business expenditures are required to be made daily which has come to a halt on account of the attachment order. It was urged that the Company cannot survive unless it has funds to run and manage the affairs of the Company. It was, thus, contended that it is essential for this Tribunal to lift the attachment order otherwise there would be colossal damage.

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SAT Held

SAT observed that the notice of demand was issued and the appellants became aware that the Recovery Officer had initiated proceedings under section 28A of the SEBI Act. No attempt was made by the appellants to press the interim application at that stage nor the appellants brought this fact to the knowledge of the Tribunal.

SAT further observed that from the track record of the appellants it was found that under the impugned order the appellants are required to refund a sum of Rs. 14,106 crores along with interest at the rate of 15 percent per annum to the investors. Whether this amount is required to be refunded or not is a subject matter of appeal which will be decided later on depending upon the merits.

However, during the pendency of the appeal, equities have to be balanced. Taking judicial notice of the fact that the appellant submitted that the total expenses of the appellant companies are around 46 crores per month, then it can be presumed that the annual turnover of the Appellant would be in 100 and 1000 crores on a rough estimate. Therefore, it is opined that the appellants can deposit some amount according to the impugned order.

Appellants were directed to deposit the sum due before SEBI within four weeks. Such amount shall be kept by SEBI in an escrow account which will be subject to the result of the appeals. Upon deposit of the aforesaid amount, the attachment order against the Company and its Directors would be lifted forthwith.

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