SEBI Fights On: Regulator Moves Supreme Court Against SAT Relief Granted to Sahara Corp Managers in OFCD Case

SEBI Fights On: Regulator Moves Supreme Court Against SAT Relief Granted to Sahara Corp Managers in OFCD Case​

The Securities and Exchange Board of India (SEBI) has escalated a significant legal battle, moving the case before the Supreme Court after the Securities Appellate Tribunal (SAT) granted relief to key executives of Sahara India Commercial Corporation Ltd (SICCL). This move targets part of the SAT's ruling concerning the alleged illegal issuance of Optionally Fully Convertible Debentures (OFCDs).

A specialized vacation bench consisting of Chief Justice Surya Kant and Justice V Mohana is set to hear SEBI’s plea on June 18. The challenge directly pertains to the legal culpability of four managers and the company secretary following the massive fund mobilization through these debentures.

SAT Upholds SEBI's Regulatory Action Against SICCL​

The matter first reached the SAT on March 9, where a three-member bench upheld the regulatory action initiated by SEBI against SICCL. The tribunal dismissed appeals filed by the corporation and its directors regarding the OFCD issuance.

The core of the ruling established that the OFCDs issued by SICCL between 1998 and 2008 constituted a public offer. This classification brought the corporate actions squarely within SEBI's regulatory jurisdiction, according to the tribunal.

Scale of Fund Mobilization Under Scrutiny​

The SAT findings determined that SICCL mobilized approximately Rs 14,106 crore through these debentures. The funds were collected from nearly 1.98 crore investors during the designated period.

This massive scale of fund mobilization was deemed by the tribunal to preclude it from being classified as a private placement, countering the company's initial claim. The regulatory action primarily stemmed from an October 2018 order by SEBI.

Managers and Secretary Granted Relief at SAT​

While SICCL and its board directors faced the consequences of their actions, the SAT made a distinction regarding the liability of certain employees. The tribunal granted relief to four managers and the company secretary in a separate appeal.

The SAT noted that as employees, these individuals could not be held liable for the corporation's overall misconduct. However, it also observed that the prospectus was signed by the company secretary under powers of attorney.

Supreme Court Hears Challenge to Specific Ruling Points​

The current focus of the litigation is SEBI’s challenge concerning this specific aspect of the SAT decision. The originally issued order from SEBI directed the company to refund the money raised via the debentures.

Furthermore, the original regulatory mandate included requiring SICCL to disclose details of its inventory and debarring certain officials from accessing the securities market. These aspects are central to the ongoing legal challenge before the apex court.