SAHARA INDIA REAL ESTATE CORPORATION LIMITED & ORS. ..

APPELLANTS VERSUS SECURITIES AND EXCHANGE BOARD OF INDIA & ANR. .. RESPONDENTS WITH CIVIL APPEAL NO. 9833 OF 2011

Mohita

ABOUT SAHARA
Sahara India Pariwar is a major entity on the corporate scene having diversified business interests that include Finance, Infrastructure & Housing, Media & Entertainment, Consumer Merchandise Retail Venture, Manufacturing and Information Technology. Mission statement Quality is our essence and we, at Sahara India Pariwar, have always stressed on the Qualitative aspect. Consequently in this run for quality, quantity has always pursued us. We look forward to reaching the zenith and reaffirm our commitment to the process of sound nation-building.

http://www.sahara.in/overview.html

SEBI
Securities and Exchange Board of INDIA is the regulator for the securities market in India. It was established on 12 April 1992 through the SEBI Act, 1992.

SEBI has to be responsive to the needs of three groups, which constitute the market:
the issuers of securities the investors

the market intermediaries.

http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India

WHAT HAPPENED?
Two firms of Sahara Conglomerate: Sahara Housing Investment Corporation

Sahara India Real Estate Corporation. (aka Sahara Commodities)

These two companies issued OFCD to collect money from investors.

~23 million people, mostly from villages and small towns subscribed to this scheme. They invested ~24,000 crores rupees in these OFCDs of SAHARA.

http://mrunal.org/2013/01/economy-sebi-sahara-ofcd-case-optionallyfully-convertible-debentures-meaning-explained.html

OFCDS OPTIONALLY FULLY CONVERTIBLE DEBENTURES

DIFFERENCE BETWEEN BONDS AND DEBENTURES

Bonds Issued by Union Government State Government PSUs Debentures Issued by Companies

Second difference: the different rates of Stamp Duty applied on each of them. Third difference: The interest rate offered by Debenture is (usually) higher than Government Bonds. Because Government more likely to repay = no need to seduce customers with higher interest rate.

Convertible debentures: They can be converted into shares of the company on the expiry of xyz date. Non-Convertible Debentures: They cannot be converted into shares.

Ofcd: These debentures can be converted into shares, when debt holder wishes, But the rate, will be decided by the company e.g. 20 debentures =>1 share.

Under Section 55A(b) of the Companies Act, 1956 to administer various provisions relating to issue and transfer of securities to the public by listed companies or companies which intend to get their securities listed on any recognized stock exchange in India and also the question whether Optionally Fully Convertible Debentures (for short 'OFCDs') offered by the 2 appellants should have been listed on any recognized stock exchange in India

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1351500106870.pdf

ALLOTMENT OF SHARES AND DEBENTURES TO BE DEALT IN ON STOCK EXCHANGE

(1) Every company intending to offer shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application to one or more recognized stock exchanges for permission for the shares or debentures intending to be so offered to be dealt with in the st.ock exchange or each such stock exchange

60B. INFORMATION MEMORANDUM

(1) A public company making an issue of securities may circulate information memorandum to the public prior to filing of a prospectus. (2) A company inviting subscription by an information memorandum shall be bound to file a prospectus prior to the opening of the subscription lists and the offer as a red-herring prospectus, at least three days before the opening of the offer. (3) The information memorandum and red-herring prospectus shall carry same obligations as are applicable in the case of a prospectus.

(4) Any variation between the information memorandum and the redherring prospectus shall be highlighted as variations by the issuing company.

(5) Every variation as made and highlighted in accordance with subsection (4) above shall be individually intimated to the persons invited to subscribe to the issue of securities. (6) In the event of the issuing company or the underwriters to the issue have invited or received advance subscription by way of cash or post-dated cheques or stock-invest, the company or such underwriters or bankers to the issue shall not encash such subscription moneys or post-dated cheques or stock-invest before the date of opening of the issue, without having individually intimated the prospective subscribers of the variation and without having offered an opportunity to such prospective subscribers to withdraw their application and cancel their post-dated cheques or stock-invest or return of subscription paid. (7) The applicant or proposed subscriber shall exercise his right to withdraw from the application on any intimation of variation within seven days from the date of such intimation and shall indicate such withdrawal in writing to the company and the underwriters.

(8) Any application for subscription which is acted upon by the company or underwriters or bankers to the issue without having given enough information of any variations, or the particulars of withdrawing the offer or opportunity for cancelling the post-dated cheques or stockinvest or stop payments for such payments shall be void and the applicants shall be entitled to receive a refund or return of its postdated cheques or stock-invest or subscription moneys or cancellation of its application, as if the said application had never been made and the applicants are entitled to receive back their original application and interest at the rate of fifteen per cent from the date of encashment till payment of realization. (9) Upon the closing of the offer of securities, a final prospectus stating therein the total capital raised, whether by way of debt or share capital and the closing price of the securities and any other details as were not complete in the redherring prospectus shall be filed in a case of a listed public company with the Securities and Exchange Board and Registrar, and in any other case with the Registrar only.

SIRECL was originally incorporated as Sahara India C 3 Junxion Corporation Limited on 28.10.2005 as a public limited company under the Companies Act and it changed its name to SIRECL on 7.3.2008. As per the Balance Sheet of the company as on 31.12.2007, its cash and bank balances were Rs.6,71,882 and its net current assets worth Rs.6,54,660. Company had no fixed assets nor any investment as on that date. SIRECL's operational and other expenses for the three quarters ending 31.12.2007 were Rs.9,292 and the loss carried forward to the Balance Sheet as on that date was Rs.3,28,345.

SIRCEL, therefore, floated the issue of the OFCDs as an open ended scheme and collected an amount of Rs.19400,86,64,200 (Nineteen thousand four hundred crores, eighty six lacs, sixty four thousand and two hundred only) from 25.4.2008 to 13.4.2011. Company had a total collection of Rs.17656,53,22,500 (Seventeen thousand six hundred and fifty six crores, fifty three lacs, twenty two thousand and five hundred 9 only) as on 31.8.2011, after meeting the demand for premature redemption. The above mentioned amounts were collected from 2,21,07,271 investors.

http://mrunal.org/2013/01/economy-sebisahara-ofcd-case-optionally-fullyconvertible-debentures-meaningexplained.html

Thank You