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Thursday, February 14, 2013

Market regulator Sebi freezes assets of Subrata Roy and two Sahara Group companies

The Securities and Exchange Board of India, or Sebi, on Wednesday seized bank accounts and properties of two Sahara Group companies and its promoter - the enigmatic and colourful Subrata Roy - a move that could make it difficult for the Lucknow-based group to carry out normal business.

In an order issued late Wednesday evening, the capital market regulator ordered the attachment of the bank accounts and properties of Roy and a few other directors; assets of two Sahara Group companies that had forayed into real estate; development rights on thousands of acres of land in Aamby Valley; prime locations near Gurgaon, Versova (Mumbai) and Lucknow; and stakes in several special purpose vehicles floated to set up townships and realty projects.

The companies in question have been barred from redeeming mutual funds and operating bank and demat accounts. Also, they have been directed to recover investments in other Sahara Group companies.

Banks holding accounts of the companies and individuals concerned have been told to move funds to a prescribed account opened to refund investors who had purchased the convertible debentures floated by the Sahara entities to raise close to Rs 20,000 crore. The orders will come into effect immediately.

In a statement issued late Wednesday evening, Sahara Group reiterated that it owed only Rs 5,120 crore to investors. It said an application seeking interim relief would come up in the Supreme Court.

The company claimed that Sebi's order was based on outdated information. "Today's order of Sebi for attachment of the assets is based on old facts and details of assets as of January 2012. Since then, facts have changed in view of redemptions made by Sahara from time to time. This fact of redemption was known to Sebi. Hence, today's order does not take into account the changed facts and circumstances," it said.

Sahara also expressed concern that accounts of individuals had been frozen since it was the company that was liable to repay the money.

Sandeep Parekh, founder of Finsec Law Advisors, said, "The only option for them now is to pray, and perhaps seek more time from Supreme Court to delay any freeze of assets. This could probably be the first time that Sebi has attached properties and bank accounts."

The market regulator's powers are largely confined to freezing bank accounts for three months. But in this case, Sebi has gone beyond its usual powers because of the final ruling of the Supreme Court and the oral directions from the court.

If the regulator succeeds in monetising the assets after it attaches them, it would be possible to refund a sizeable part of the liability of Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation (SHICL) -- the firms that had issued OFCDs to close to 3 crore investors between April 2008 and 2011.

Along with Roy, the other directors whose movable and immovable properties would be attached are Vandana Bhargava,Ravi Shanker Dubey and Ashok Roy Choudhary.

All of them have been told to furnish details of all properties standing in their names within 21 days.

One of the former Sahara employees said while it was possible for Sahara to have parked assets in other companies, it could be difficult for the group to raise funds from the market. Sahara moved into real estate after the Reserve Bank ordered it to wind up its para-banking outfit, which was the group's original money spinner. At present, it is in the process of opening a retail chain, called Q-Shop.

The Sebi-Sahara battle has its origin in a Sebi order issued two years ago, stating that the Sahara companies were not authorised to raise funds without regulatory permission and completing the formalities of a public issue. In August 2012, the Supreme Court directed the Sahara firms to refund, with interest, all the money raised. A few weeks ago, the apex court issued notice to Sahara on a Sebi petition alleging that the companies should be held in contempt as it had failed to deposit Rs 24,000 crore collected from millions of investors. It asked Sahara to file an affidavit to explain its actions within two weeks.

Till now, Sahara has deposited Rs 5,160 crore to Sebi. The company, which alleges that Sebi refused to accept its documents, claims that most of the money has been repaid to investors. But according to Prashant Saran, the Sebi wholetime member who signed the order, "more than Rs 15,000 crore was not capable of being redeemed at all".

Source: Economic Times


Anonymous said...

SEBI has been under fire for various money laundering activities and climbing the stairs to head the pile of corruption at very good pace.I would request people to first deal with SEBI (Established by Government of India),after that deal with Sahara which has worked wonders for welfare of people since so many years. 

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