The Supreme Court on Tuesday declined to stay fund mobilisation by Sahara group firms, but said SEBI can ask for information from the companies regarding their money-mopping exercise.
The apex court was hearing SEBI's petition against the Allahabad High Court order staying the capital market regulator's ban on Sahara group entities (such as Sahara Housing Investment Corporation and Sahara India Real Estate Corporation) and their promoters from raising funds from the market through Optionally Fully Convertible Debentures (OFCD).
OFCD is a debt instrument that can be converted into equity at the holder's option as per the terms of the offer. SEBI wanted the apex court to stay Sahara's fund raising to protect investors' interest, but the court said it is best left to investors to take a call on their investment risks.
Without going into the merits of the case, the court said SEBI can ask for information from Sahara including investors in the OFCDs. The apex court also asked the Allahabad High Court (currently hearing the matter) to dispose it off expeditiously.
Sahara's plan was to raise Rs 20,000 crore through OFCDs, its counsel, Mr Abhinav Mukjerjee, said, adding that the group had raised around Rs 4,800 crore as of June 2009 through this route. Sahara had said OFCDs are made on private placement basis and offered to friends and associates and therefore it is not a public offer.
SEBI had restrained Sahara from accessing the market for “non-disclosure” of information including investors in the OFCDs. According to norms, if the offer or the invitation to subscribe for shares or debentures is made to over 50 persons, it would be deemed to be a public issue, SEBI said. But Sahara contended that its firms are not listed entities and it has no intention of listing the OFCDs and therefore, the issuance of OFCDs does not come under SEBI's purview.
On SEBI's plea to come out with an advertisement on the matter saying it was sub-judice, the apex court said the market regulator was free to do what it deems fit. Besides, the Registrar of Companies (RoC) has also been told to file its reply in the matter. Sahara had argued that it was RoC, and not SEBI, that has jurisdiction in the matter.