2013 (2) TMI 418 - Board - Companies Law

Refund amounts collected through RHPs - direction to furnish the details with supporting documents to establish whether they had refunded any amount to the persons who had subscribed through RHPs as directed in 2012 (9) TMI 559 - SUPREME COURT dated 31st August, 2012 - Held that - As in non compliance of order of Supreme Court Sahara Group deposited only Rs. 5120 crore with SEBI but failed to pay full amount as directed, all the assets mentioned in Serial nos.1 to 9 of Table A , of SIRECL viz investments in Group Companies, group entities, Special Purpose Vehicles and partnership firms belonging to Sahara Group and the investments mentioned at S. Nos. 10 and 11 in Table A are liable to be attached. Sahara India Real Estate Corporation Limited is directed to furnish details of investments, if any, other than those enumerated above, within 21 days from the date of this order and is restrained, with immediate effect, from operating its accounts or demat account or redeeming any of the mutual fund units owned and/or held by it with all the branches of all the banks and withdrawing any investment made therein. Also directed to furnish the details pertaining to nature of development rights, names of special purpose vehicles and what constitutes stake and the details of companies, firms etc., as enumerated in the affidavit and the annexures filed before the Hon ble Supreme Court on 04.01.2012, within 21 days from the date of this order. And not to dispose of the units of mutual funds valued of Rs. 23 crores as on 30.11.2011 and to recover its investments in partnership firms belonging to the Sahara Group to the extent of Rs. 125 crores as well as loans and advances of Rs. 204 crores as on 30.11.2011, as mentioned in S. No. 12 of Table A and deposit the proceeds thereof with SEBI Also to immediately deposit cash and bank balances and fixed deposits in its name with SEBI of Rs. 1655 crores and not to transfer any shares held by it in any company, to any person and to deposit with SEBI, share certificates representing the purchase of 22, 05,64,045 shares of Aamby Valley Limited a consideration of Rs. 5207 crores . Also attachment and Directions given with regard to Shri Subrata Roy Sahara, Ms Vanadana Bhargava, Shri Ravi Shanker Dubey and Shri Ashok Roy Choudhary - directors of company - freezing of all the bank accounts/demat accounts & attachment of all movable and immovable properties standing in their names.

Summary

Issues Involved:
1. Issuance of Optional Fully Convertible Debentures (OFCDs) by SIRECL.
2. SEBI's directive for refund of money collected through OFCDs.
3. Compliance with SEBI's and Supreme Court's orders.
4. Attachment and sale of properties for non-compliance.
5. Liability of directors and promoter of SIRECL.

Detailed Analysis:

1. Issuance of Optional Fully Convertible Debentures (OFCDs) by SIRECL:
SIRECL issued OFCDs amounting to approximately Rs. 19,400 crores as of 13.04.2011. SEBI found that SIRECL and SHICL contravened the Companies Act, 1956, and SEBI Act, 1992, among other regulations. Consequently, SEBI directed SIRECL to refund the money collected under the Red Herring Prospectus (RHP) to all investors with interest.

2. SEBI's Directive for Refund of Money Collected Through OFCDs:
SEBI's order dated 23.06.2011, confirmed by the Securities Appellate Tribunal (SAT) and upheld by the Supreme Court, directed SIRECL and SHICL to refund the collected amounts with interest. The Supreme Court modified SEBI's directions, mandating Saharas (SIRECL and SHICL) to refund the amounts collected through RHPs dated 13.3.2008 and 16.10.2009 with 15% interest per annum to SEBI within three months.

3. Compliance with SEBI's and Supreme Court's Orders:
SIRECL failed to comply with several Supreme Court directions, including furnishing documents to SEBI within 10 days and depositing the amounts by the stipulated deadlines. Despite submitting documents in 127 trucks, these were found to be mixed up, making verification impossible. Consequently, SEBI proceeded as if no refunds were made, as per direction no. 3.

4. Attachment and Sale of Properties for Non-Compliance:
Due to non-compliance with the Supreme Court's orders, SEBI was constrained to take necessary actions, including attachment and sale of properties and freezing of bank accounts. Specific assets, including development rights in lands owned by Sahara group entities and stakes in various projects, were ordered to be attached. SEBI directed the transfer of funds from bank accounts to SEBI-SAHARA REFUND Account and restrained SIRECL from operating its accounts and disposing of assets.

5. Liability of Directors and Promoter of SIRECL:
Shri Subrata Roy Sahara, holding 70% shares in SIRECL and SHICL, along with directors Ms. Vandana Bhargava, Shri Ravi Shanker Dubey, and Shri Ashok Roy Choudhary, were held jointly and severally liable to refund the collected amounts with interest. Their bank accounts and properties were ordered to be frozen and attached, and they were directed to furnish details of their properties within 21 days.

Conclusion:
The judgment emphasizes strict compliance with regulatory directives and judicial orders. SEBI's stringent measures, including attachment of assets and freezing of accounts, underscore the legal repercussions of non-compliance. The liability of key individuals highlights the accountability of corporate officers in regulatory violations.