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Sebi has around Rs.11, 500 crores of Sahara‘s money, including bank interest.

By the time Saharasri Subrata Roy shall come out, that is, when full bail amount is paid, Money of Sahara India Pariwar Company lying with Sebi will be Rs.18, 000 crores cash.  Since no bank is ready to give Bank Guarantee to Sahara India Pariwar without 100% cash margin, it is going to be Rs.18, 000 crores of cash with Sebi.

While in the last 26 months, Sebi had to pay only around Rs.2 crores. More importantly, Sebi came out with an All-India Media Advertisement, twice, inviting investors for repayments. But till now, they have received from all over India, a demand of Rs.20 crores only. A question can now arise that whether the investors exist or do not exist; meaning, are these all fictitious accounts?

Only verification can clarify this point, as mandated in Hon’ble Court’s order of 2012. Since then, in almost past 26 months, Sebi has not started verification; the reason best known to them.

About fictitious account, it must be mentioned here another issue pertaining to the Reserve Bank of India (RBI) which is as follows:

Between 2008 and 2012, on RBI’s order, Sahara paid back Rs.18, 000 crores under the command of RBI’s two Statutory Auditors and 3 RBI nominated Directors.  The bank account of that amount was controlled by the RBI.  A strict rule was followed that when RBI auditors finally checked the identity of all investors (KYC), only then the next months’ payments were all owed by the RBI and during the process, in 4 years, RBI did not find any fictitious account; not even one.

I am slightly disturbed

parrikar_facebook (2) (1)

parrikar_facebook (2) (1)

Supreme Court has agreed to hear the appeals of Sahara filed against SEBI’s regarding verification of investors
The Supreme Court does not have any intention to cripple the business of the company

In today’s hearing, the Hon’ble Supreme Court has clarified that Sahara can go ahead with junior loan against second charge on foreign properties and also permitted the taking over of the loan of Bank of China by another creditor, in order to raise money for obtaining the bank guarantee. The cheques amounting to Rs. 1900 crores relating to sale of domestic properties were handed over to SEBI in the Court. The Court, during the course of hearing, emphasized that the restraint order on parting away the assets of the company should not be taken as if the court has any intention to cripple the business of the company. Rather, the court observed that the company shall have full freedom to run all legitimate businesses and the directions of the Court are not to prohibit the regular businesses of the company.

On the point of verification of investors and refund claimed by Sahara, significant development has taken place in as much as the Supreme Court has agreed to hear the appeals of Sahara filed against SEBI’s illegal orders of rejecting all the redemption documents on the next date of hearing.

The Hon’ble Supreme Court, during the course of hearing, also observed that SEBI is under an obligation of the Hon’ble Supreme Court’s order passed by the 2 judges and 3 judges benches, to verify the investors and refund to them, in accordance to the mechanism prescribed in the order dated 31st August, 2012 which was again reiterated in the order dated 5th December 2012 passed by 3 judges bench of Supreme Court, of which compliance has been sought. The case is now listed for 9th of January, 2015, for further hearing.

The court has also directed SEBI to make refund to all multiple account investors.

The Sahara had filed applications seeking permission of the Hon’ble Supreme Court for taking over of the loan of Bank of China relating to three foreign properties. The Sahara will also be raising a loan of US$650 million on the foreign properties for being utilized for the payment in SEBI-Sahara Refund Account in compliance of the order dated 26.3.2014.

The court, on the insistence of SEBI, has asked Sahara to show the ESCROW agreement with respect to the junior loan of US$650million and once SEBI gives a no objection and the money is transferred in the ESCROW account, the Hon’ble Court will permit the taking over of the loan from Bank of China and raising of the junior loan.

The Hon’ble Supreme Court was also shown the agreements of sale with respect to domestic properties. The SEBI, however, has sought time to submit its response regarding the proposed sale of domestic properties at Chomma, Jodhpur, Vasai and Pune.

The Sahara have demonstrated that in addition to Rs 3,117 crore already deposited, the balance amount for compliance of the order dated 26.3.2014 have been arranged and once necessary permissions are granted by the court, the money will reach SEBI in a phased manner. The Hon’ble Supreme Court has now listed the matter for Tuesday, 2nd December 2014.

Gautam Awasthi

Advocate

Ref: http://www.newspatrolling.com/statement-of-advocate-gautam-awasthi-on-28th-november-2014/

The Central Bureau of Investigation (CBI) has zeroed in on at least four senior officials, including two of market regulator Sebi and a retired manager of the Reserve Bank of India, for their alleged role in laundering huge amounts of money in the multi-crore Saradha financial scam.

The agency, which has already made two arrests in connection with the ponzi scheme in West Bengal — East Bengal Club executive member Debabrata Sarkar on Wednesday and businessman Sandhir Agarwal on Saturday — had put the said officials, all from regulatory organisations, under the scanner. The investigation against them is now at an advanced stage.

Significantly, the Enforcement Directorate (ED), which is probing into the money laundering aspect of the scam, had found several “serious irregularities” in the functioning of these officials.

The ED had also interrogated these four along with several others. They include a retired RBI manager, a top official in the Registrar of Companies, Kolkata, and two Sebi officials. They are accused of “lapses”, and investigators revealed that they “compromised on their official responsibility” and had allegedly accepted huge “bribes” to look the other way. Sources in the CBI said the agency has collected proof about their involvement.

Earlier CBI sleuths during raids across several locations across the country, had seized documents that showed how certain officials tried to cover up the business of Saradha Group chief Sudipta Sen.

For instance, in 2009, 140 companies of Saradha Group were registered with the ROC, Kolkata in a span of four days. Significantly, more than 50 of these 140 companies were registered on a Saturday, revealed a senior official of Union finance ministry. Officially, the ROC is closed on Saturday.

“RBI and Sebi are equally responsible (for the scam). While Sebi officers were sitting on the Saradha files, RBI did not inspect the company even though it has the power to do so. The vigilance commission in Sebi has already conducted an internal inquiry into the malpractices of some of its officers. A report has been submitted to both the ED and the CBI,” the official said.

He added that the ROC, Kolkata also played a major role in the scam. “Every year, ROC used to receive the balance sheets of the company. They should have identified the irregularities… Most of the balance sheets of the company are now found to be fake and mostly with manipulated data,” he said.

See more at: http://indianexpress.com/article/business/business-others/ex-rbi-official-sebi-men-and-roc-officer-under-cbi-scanner-in-saradha-scam/#sthash.tztFxdCG.dpuf

Sahara

Everyone loves it when a regulator acts tough against large corporations. So when the Securities and Exchange Board of India (Sebi) banned DLF Ltd and six senior officials, including its chairman and founder, it expectedly won plaudits. Shekhar Gupta, a senior journalist, tweeted, “Sahara, now DLF, Sebi stature grows…”

However, Sebi’s conduct in the DLF case has been vastly different compared with its handling of Sahara. It took more than seven years to pass its judgement. During this time, the original complainant against DLF, K.K. Sinha, was forced to take Sebi to court alleging “deliberate inaction”. Besides, the Delhi high court castigated the regulator on more than one occasion for dragging its feet on the case.

And while many have been enamoured by the ‘housewives’ plot allegedly used by DLF to hide its association with some subsidiaries, as shown in Sebi’s order, the truth is that Sinha informed the Delhi high court about this way back in September 2008.

For some perspective, Sinha first sent a complaint directly to Sebi, alleging that DLF hadn’t disclosed an ongoing litigation between him and a DLF subsidiary in its initial public offering (IPO) prospectus. Sebi’s order suggests that this complaint was forwarded to DLF for its response. The developer, obviously, denied the allegations, saying that the said company wasn’t a subsidiary.

Because of Sebi’s inaction at the time, Sinha filed a writ petition before the Delhi high court in 2007. Some of Sebi’s arguments during the hearing of this case are worth noting. Sebi objected that since the petitioner was not an investor in the securities market, he had no locus standi to file the petition. It also contended that since the subsidiary company in question was an unlisted company, it wasn’t amenable to the Sebi regulations and guidelines. Note that in the Sahara case, Sebi took the exact opposite stand, which is that it acted against an unlisted company.

Sebi didn’t exactly cover itself with glory with those statements, and the high court judge observed, “In the instant case, as the facts reveal, Sebi was inexplicably slow in reacting to the petitioner’s complaints. Its subsequent failure to initiate further steps to investigate the transaction in question was also not consistent with its statutory obligation.” In his judgement in April 2010, the judge directed Sebi to undertake an investigation into the complaints made by Sinha.

While DLF and its alleged subsidiary company filed two separate appeals against this order, a third appeal was filed by Sebi in the Delhi high court. According to a report in Firstpost.com, a division bench of the court told Sebi’s lawyer that the job of the regulator was to regulate and “not take sides” in a private matter. According to the report, chief justice Dipak Mishra said that Sebi had no business making a frivolous appeal against an earlier order of the court asking it to investigate whether DLF had indeed violated its regulations. According to Sebi’s order last week, with this judgement in July 2011, the high court disposed of the appeals and asked Sebi to examine the matter. It’s worth noting here that Sebi’s order doesn’t mention that it had itself filed an appeal against the April 2010 high court judgement. It only mentions the appeals by DLF and the subsidiary.

After the July 2011 order, Sebi appears to have pulled up its socks. Later that year, the regulator ordered an investigation into the allegations. While DLF challenged this order again, the court ruled in favour of Sebi. But again, the question remains why Sebi took so long to put out its final judgement. Much of the material it needed for its investigation was already provided by the original complainant. According to a report in The Economic Times, Sebi was asked to speed up its probe in May 2013.

Of course, Sebi did its own investigative work as well, and tied up loose ends by looking at how the sham transactions by DLF employees was funded. Besides, it rectified past mistakes by putting out a strong order against a large corporation. But in the above backdrop, that looks like a silver lining in a dark cloud, unless, of course, one has really low expectations from the regulator. The real hero in the story is evidently Sinha, who doggedly pursued the case for over seven years. Sebi, if anything, comes across as a reluctant hero.

Now, questions are being raised if the regulator will look at the role of merchant bankers to the IPO and the role they played in hiding DLF’s association with this subsidiary company, and it’s still not clear if Sebi will act against them. Its disclosure and investor protection guidelines state clearly that merchant bankers must ensure fair and true disclosure. In DLF’s case, as Mint reported last week, one of the investment bankers to the IPO was also involved in funding (through its parent company), the alleged sham transactions by DLF employees to hide DLF’s association with the subsidiary. (See: bit.ly/ZCBW9U )

Although it dithered on the DLF case, Sebi has done well to bring closure to the case (although, of course, it will now be fought at the Securities Appellate Tribunal and perhaps, even the Supreme Court). But it should go further and look at the role of investment bankers and other related issues. To stop at only Sinha’s complaint will be quite an inadequate response, considering all that its investigations have unearthed thus far.

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