Subrata Roy’s plea rejected in bond sale case

The Special Court in Mumbai is expected to soon frame charges against the accused- Sahara chairman Subrata Roy and his accomplices under the Securities and Exchange Board of India (Sebi) Act, considered to be the first stage for the commencement o...

Agencies

Sahara chairman Subrata Roy (file photo)

Mumbai: A special court in Mumbai has rejected the pleas of Sahara chairman Subrata Roy, two of his group companies and three others to discharge them in a case where they are accused of selling bonds to the public by violating securities rules.

This will set the stage for the commencement of the trial in the case. The court is expected to soon frame charges against the accused under the Securities and Exchange Board of India (Sebi) Act, considered to be the first stage for the commencement of trial.

“At this stage the accused persons have not brought any documentary evidence of unimpeachable quality on record to indicate that allowing the proceedings to continue would be an abuse of process of the court,” special judge MM Umar observed earlier this week. “There is sufficient material on record against the accused persons to frame the charge,” the court said, while noting that it didn’t see filing of the case as an “arm-twisting tactic”.


The case pertains to alleged misuse of optionally fully convertible debentures (OFCDs) issued by two companies — Sahara India Trustee Company, now known as Sahara Housing Investment Corporation, and Sahara India Real Estate Corporation.

According to the case, unsecured OFCDs were issued through private placement to friends, associates, group companies, employees and others affiliated or connected to the Sahara group of companies. Sahara Housing allegedly collected Rs 6,380.50 crore through OFCDs between 2009 and 2011, from more than 75 lakh investors.

Sahara India Real Estate allegedly raised another Rs 19,400 crore between 2008 and 2011 from over 2 crore investors. Other than Roy and the two companies, the others accused are Ashok Roy Choudhry, Ravi Shankar Dubey and Vandana A Bhargav.
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Sebi had claimed Sahara had to refund over Rs 37,000 crore, including interest, to the investors in the bonds. Sahara claimed that it had already paid much of the money that was due. The Supreme Court had ordered Sahara to deposit the money with the regulator, and had sent Roy to jail after group failed to meet the deadlines for payment. The court later released him on parole.

Sahara had contended in the Mumbai court that the bonds were hybrid products, thus did not come under the jurisdiction of Sebi and were governed by the Registrar of Companies (RoC) under ministry of corporate affairs. It said the two group companies had submitted the red-herring prospectus with the RoC before they issued the bonds.

On this, the court observed that under the Companies Act 1956, public companies which intend to get their securities listed on a recognised stock exchange in India needed to be administered by Sebi. “Therefore, the contention raised on behalf of the accused persons that Sebi has no power to deal with the matter under provisions of the Companies Act, 1956, appears not correct and (is) unacceptable,” it said.
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