The Supreme Court on Friday declined the Sahara Group's plea to issue a notice to the government in connection to a dispute with market regulator Sebi, which had directed the firm to return funds raised from investors under an OFCD scheme along with 15 per cent interest.
"We do not want Union of India (government) to come at this stage. Let them (Sebi) come and clarify. We have our own query on it," said the bench headed by the Chief Justice S H Kapadia.
During Friday's proceedings, senior advocate Fali S Nariman, appearing for the Sahara group, said that Sahara was not a listed company and only the government has jurisdiction over it and not market regulator Sebi.
"We (Sahara) are not a listed company and the government (Ministry of Corporate Affairs) has jurisdiction over us. If there is any listed company, then Sebi has jurisdiction," he said, asking the bench to issue a notice to the government seeking a clarification of its stance.
Narimnan said that despite the matter was pending in the court, Sebi issued fresh cause notice to the group and passed the order.
On it, the bench said," We have asked the Sebi to explain it. We wanted to know that from where you got this (concept of) OFCD."
The Supreme Court further said that it had asked Sebi as 'we wanted investors to be protected.'
The bench later the adjourned the matter for a week on the request made by Sebi's counsel P Venugopal.
Sebi submitted that Sahara group has filed some documents before it and the regulator wanted to go through it.
In November, Sebi had indicated that two Sahara Group firms -- Sahara India Real Estate Corporation and Sahara Housing Investment Corporation -- were raising funds from the public through an optionally fully convertible debentures scheme without conforming to prudent disclosure and other investor protection norms.
Subsequently, Sahara Group had contested Sebi's authority to look into the issue in the Supreme Court, asserting that it was a privately held company and not listed and therefore, was under the jurisdiction of the Ministry of Corporate Affairs.
Earlier, on June 27, a vacation bench of the apex court, comprising justices P Sathasivam and A K Patnaik had declined to hear the plea of Sahara India Real Estate Corp and asked to list it before the Chief Justice which has been hearing the case.
Following the orders of the Supreme Court, the Security and Exchange Board of India had on June 23 passed an order and directed the two Sahara group firms -- Sahara India Real Estate Corporation and Sahara Housing Investment Corporation -- to refund the money raised by them in OFCD citing violation of regulatory norms.
As per Sebi's order, the two companies and its promoter Subrata Roy Sahara, and the directors -- Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary -- jointly and severally, shall refund the money collected, the order said.
Besides, the regulator has also restrained the entities from accessing the securities market for raising funds, till the time payments are made to the satisfaction of the Sebi.
As per the order of the May 12 order of the apex court, the order of the Sebi order was not to take effect till its further order.
During the last hearing on May 12, the apex court had asked Sebi to proceed with its probe into Sahara group's OFCD scheme by observing that investors may not have any knowledge about these products and might feel cheated like in the Harshad Mehta scam.
The court had also allowed Allahabad high court to proceed with its hearing, where the Sahara group has challenged Sebi's direction to give details of its investors.
The court, during the proceeding, had also sought to know from Sahara the law under which it was running the OFCD schemes.
Though Sahara's counsel tried to explain the nuances of the OFCD scheme, the apex court was not satisfied and said: "Till today, I do not know what is OFCD. How can some
investors know? We want Sebi to decide."
"We want to know on what basis you were calling for investment in OFCD," the bench asked.
The bench mentioned that the scheme is meant for rural people and they were not aware of it.
"Investors are not aware of OFCD. At the end of day, they would come and say that they were cheated. . . You know Harshad Mehta's case, same modus operandi was there. Investors were not aware of the scheme," the bench had said.
The court had repeatedly asked the Sahara Group to make available their brochure and other relevant information which they were giving to investors through their agents to find out the nature of the OFCD scheme.
The bench appeared unconvinced with the logic of the Sahara Group firms that OFCD schemes doesn't come under the purview of the Sebi Act.
OFCDs are a type of bond with the option to fully convert them into equity at a rate decided by the company.