Sebi Sahara
Call For Paper Advertisement

The SEBI v. Sahara India Case, ongoing case since 2009, is one of the most riveting corporate cases in recent times. What began as an innocuous letter pointing out a discrepancy in the Draft Red Herring Prospectus (hereinafter referred to as DRHP) of Sahara, soon snowballed into uncovering illegal scheme of public offering made by the company. Then began a torrent of feeble defenses and a perpetual scramble for loop-holes which were finally shut off by the Supreme Court of India by its judgements. Not just one but multiple Courts and Government authorities were engaged in this high-profile saga. However, with the recently held auction Sahara’s flagship project, Aamby Valley, the end does not seem to be anywhere around the corner.


Sahara Parivar on 29th September, 2009 officially filed a DRHP with the Registrar of Companies for its real estate company Sahara Prime City Ltd (hereinafter referred to as SPCL). The act of raising money from public through the instrument of shares is known as Initial Public Offering (IPO). It is permitted to be undertaken only by listed companies under the supervision of SEBI. SEBI being a regulatory authority, scrutinizes details of the public issue, the sound reason, and looks into the financial position before any company is allowed to roll out its IPO in share market. This is a standard regulating practice of the Apex market regulating body of India. The main objective is to keep in check the malpractices and safeguard the interest of the investors.

Call For Paper Advertisement

The DRHP submitted to SEBI is not a confidential agreement and is uploaded on its website.  It is readily made available to the public. The rationale is that SEBI, being the sole capital market regulating body, cannot pursue these documents alone. The prospectus at times runs into thousands of pages. It is indeed, a herculean task. Additionally, even if it accidentally misses out on any fact, detail or figure, it is jeopardizing interest of millions of investors. To preclude from any untoward incident, it uploads the prospectus on its official website. Furthermore, it opens window for the public to raise concerns about the accounts of financial situation. It aids the regulating body in its function. This procedure has been in practice since 1995-96.

The DRHP of Sahara Prime City Ltd was no exception. It was uploaded and was open to the public. It is a 779-page long document containing relevant financial, legal and other information about the company. However, the DRHP of Sahara Prime City Ltd was unique in the sense that on its page 640, in 49th para, was tucked away a simple piece of information which changed the entire fate of the company as well as its parent company, Sahara India Parivar.

This was first pointed out by Roshan Lal of Indore on 4th January, 2010. In a one-and -half page long letter addressed to the National Housing Bank, Lal brought to light the details on 640th page of DRHP. The same was pointed out in another instance. This time by the Professional Group for Investors Protection, Ahmedabad.

It stated that Sahara, being an unlisted company, was raising huge public money. It was done by the means of the Optionally Fully Convertible Debentures (hereinafter referred to as the OFCD). These are hybrid debentures, whereby initially the investor is a debtor of the company but, can own a part of the company by becoming the shareholder. However, this can occur only within a stipulated time. He/she has an option to convert their debenture bond into shares of the company. After that they can enjoy all rights a shareholder has.

The 640th page of the DRHP stated that there existed a pending dispute between the Income Tax Department and Sahara for collecting public money by the way of OFCD. The matter is pending before the Commissioner of Income Tax (Appeals), New Delhi.

This alerted SEBI against illegal and unauthorized raising of money from the public. SEBI was not only verifying and looking into the depth of the issue but also deciding on the fate of Sahara Prime City Ltd in granting them the authority to legally raise money from the public.

After a few months, SEBI banned the Company from issuing any share or raising any money from the public. It also demanded the Company to co-operate with the investigation and furnish any detail required. Sahara now attempted to evade answering the SEBI and wade their jurisdiction.

In the ensuing tussle, Sahara made a successful attempt by getting a stay order on the SEBI’s order from the Allahabad High Court on 13th December, 2010. Sahara also refused to delve either any information or to co-operate with SEBI. The Company has based its arguments on Section 55A and Section 60 B of the Companies Act, 1956.

Section 55A of the Companies Act, 1956 which discusses the special powers states that SEBI is empowered to seek information only from the listed companies. Since the application of Sahara Prime City Ltd to go Public and get listed is still pending, SEBI has no right to seek answers or any information from the Sahara Prime City Ltd. Section 60B states that if the Company files the prospectus with the Registrar of Companies, it can raise money of which SEBI has no jurisdiction.

However, this victory was short lived as the judgment was overturned on 4th January, 2010. While overturning the judgement, the Supreme Court of India reprimanded the Allahabad High Court for its judgement which was inundated with biases and extraneous consideration. The Supreme Court of India laid down a landmark and commendable precedent.

The issue concerning the jurisdiction of SEBI over a non-listed company was addressed in the light of Section 55A (c) of Companies Act. The Court stated that this section gave special powers to SEBI. It empowers SEBI to investigate and adjudicate matters on securities wherein investor’s interest is at stake. Emphasis was laid down on legislative intent behind the section and thus, SEBI had jurisdiction over matter of listed public companies to get their securities listed.

However, this alone would not empower SEBI to get the jurisdiction in Sahara case, as it was imperative for exchange, issue or transfer of securities. The Supreme Court stated that OFCDs issued by the company, claimed to be privately placed, were securities. Section 67(3) of the Companies Act speaks briefly that when any security is offered to and subscribed by more than 50 persons, it will be deemed to be a Public Offer. The argument of Sahara that the OFCDs were privately placed and only people related to the Company were investors, could not sustain. The company was held in violation of the Section 67(3) of the Companies Act as it transgressed the statutory limit ascertained under the Section. This violation attracted civil as well as criminal liability. Section 73 mandates that all public offering shall occur only through the channel of a recognized Stock Exchange. Since, the OFCDs issued by Sahara were not offered through the prescribed legal channel, they were deemed illegal.

Supreme Court of India widened the ambit interpreting the meaning of “securities”. It interpreters the word so as to include hybrid interments like OFCD along with the conventional instruments. Thus, SEBI was endowed with the jurisdiction over the matter to seek all relevant information from Sahara.

This judgement was landmark in the regard that it cleared the air regarding the conflicting jurisdiction of Corporate of Ministry and SEBI. It also filled the grey area concerning jurisdiction of the securities of Unlisted Company. Both, Ministry of Corporate Affairs and SEBI had concurrent jurisdiction over matters involving public interest.

Sahara landed in deep trouble as SEBI asked her to refund all money collected through the OFCD, along with 15% interest. This decision of SEBI was reiterated by the Supreme Court of India on 31st August, 2012.

Not only had SICCL raised money through OFCD, but also Sahara Housing Investment Corp. Ltd (hereinafter referred to as SHICL) proliferated the number of investors which came close to 30 Million and the total fund was around Rs. 24,000 Crores. Both the companies were ordered to return the money collected through the OFCDs.

The Company was ordered to refund Rs. 17,500 Crores with 15% interest within the period of 90 days. The Company claimed that it had returned fund to 90% of its investors. SEBI was asked to look into credibility of the claim and also ensure that the rest of the investors received their money back. The Company was to provide details with supporting documents to SEBI about the subscribers and investors.  The proclaimed refunds were made to the investors, within ten days i.e by September 10, 2012. No criminal sanctions were issued against the promoters, directors or the Company. The deadline fixed for refunding the money collected from the public by two Sahara companies under the OFCD scheme was November 30, 2012.

The Court stated if SEBI did not find the supporting documents claiming the return to the investors, it would be presumed that the money was not returned. If the investors were not found to be genuine, the money owed to the Companies would be transferred to the Consolidated Fund of India. The Court had appointed retired judge Justice BN Agrawal to oversee the entire matter of returning the funds. Also, the court empowered SEBI to take suitable actions to recover money from Sahara in case it defaulted.

Sahara did comply with the order of the Hon’ble Supreme Court. September 10, 2012, which was the last day for sending documents and providing information to SEBI, was quite phenomenal, eventful and moreover a dramatic day. The documents from Sahara had reached SEBI’s headquarters located in Mumbai on this day. They arrived, loaded in 127 Trucks, piled up in 31,000 cartons carrying information of all 30 million subscribers of the OFCD. The regulating body was inundated with 120 tonnes of documents.

Irrespective of the motive, intention and agenda behind the act, Sahara ended up paying the entire expense of storing, processing and digitizing the data. This was a Court order. SEBI, in order to process, store and scrutinize these documents had to engage the services of Stock Holding Corporation of India Ltd (SHCIL) for their warehouse facility. It had incurred an expense of about Rs. 41 Crores.

It was only after the verification began, repetition of names, incomplete address and other discrepancies in the information of the subscribers came to light. As reported by NDVT in 2013, around 45-50 people, with 80 scanning machines were employed to expeditiously study and analyse the documents. The expense of their salary too was borne by Sahara.

In order to clarify the claims of Sahara of already returning the money to investors, SEBI wrote to 20,000 of the subscribers. In the letter, they were asked to apply for refund. Astonishingly, only 68 of them replied. The documents contained around 1,433 Anirudh Singhs, 5,984 Kalwatis and 13,000 Atal Bihari Vajpayees.

However, the main concern of the Supreme Court was that, Sahara was approaching various forums for relief and appealing against its orders. A bench comprising by Justices KS Radhakrishnan and JS Khehar reprimanded Sahara for approaching Allahabad High Court against the order of the Apex Court in April, 2013. The order demanded attaching property of two Companies in case they failed to deposit Rs. 24,000 crores with SEBI. Also, Sahara had approached SEBI and Securities Appellate Tribunal (SAT), requesting for extension for deadline. “You are manipulating court which is going on,” said the bench. The company was held in contempt of SEBI’s order and the information provided on 10th September, 2012 was found vague.

Finally, the bench made it very clear that is wasn’t the job of SEBI to search for documents, it was the obligation of Sahara to provide the details of the subscribers. If the Sahara failed to fulfil the obligation, the money was to be remitted to the central government.

SEBI was attaching the personal property of Sahara’s Director, Subrata Roy, as he was a party to the case. Giving paramount importance to the money of the investors, the bench stated that it was not concerned with the parties. This is a clear instance of piercing the Corporate veil, though not explicitly stated.

Civil Appeal No. 8643 of 2012 was filed in the Supreme Court for the contempt. It was alleged by SEBI that Sahara did not comply with the Court orders demanding refund of the public fund. When the matter was heard on 5th December, 2012, Court modified its earlier order. Taking cognizance of the enormity of the amount, Court ordered the two companies to repay the amount in 3 instalments. The first instalment of Rs. 5,120 crores was to be immediately deposited through demand drafts. Further direction was given to deposit the balance amount of Rs. 17,400 crores together with interest @ 15% per annum with SEBI in two instalments. The first instalment amount, of Rs. 10,000 crores, was to be deposited with SEBI within the first week of January, 2013 and balance amount along with interest by first week of February, 2013.

Sahara defaulted to deposit the last two instalments of January and February, 2014. As a strict action against Sahara, SEBI first froze all accounts and seized the properties of the SIREC and SPCL on 6th February, 2013 and filed for contempt proceedings in the Supreme Court. The regulating body ordered freezing of the bank accounts, Demat accounts of all moveable and immovable properties in the name of Subrata Roy and three other directors, namely Vandana Bhargava, Ravi Shanker Dubey and Ashok Roy Choudhary. The ambitious Aambey Valley project of Sahara Group was one among the various seized properties.

The contempt hearing was heard on 4th March, 2014, wherein Subrata Roy and two other directors, namely Ravi Shanker Dubey and Ashok Roy Choudhary were sent to Tihar jail for the contempt of the court. Some considerations were made for the director woman, Vandana Bhargava who wasn’t sent to jail.

On 26th March, 2014, Court granted bail to the contemners with an extraordinary bail amount of Rs. 10,000 Crores, Rs.5,000 Crores in bank guarantee and Rs.5,000 Crores in cash.

The point to consider here is that a world-renowned businessman and director of a multi-million dollar business conglomerate was sent to the largest jail in South Asia for a crime of which punishment, under the Section 12 in the Contempt of Courts Act, 1971 is simple imprisonment for up to six months, or a fine of two thousand rupees, or both. Is there a need for such harness?

One needs to look at the case a whole from the beginning and take into consideration the depth of the matter. The decision and the required sternness of the Court has been elaborately and remarkably justified by the Justice Sikri, in his judgement of 19th June, 2015. In this judgement, he granted bail to the contemners, on the condition that owed amount of Rs. 36,000 Crores to be repaid in 9 instalments within a period of 18 months. Rs. 3,000 Crores were payable, every two months. And the last instalment shall be of the remaining amount.

It states that the Court was very well aware and concerned that the condemners were deprived of their civil liberties. However, this extreme action was need of the hour in the light of the stubborn attitude, relentless defiance of the Court orders and the huge amount of Rs. 36,000 Crores (including interest) owed to the poorest of poor Indians.

From the beginning, Sahara has claimed to have attracted investment from general public who majorly include cobblers, labourers, artisans, peasants etc. Safeguarding the interest of investors has been the focal point of the case since its very inception. Legal realism was at the core of the decision. While acknowledging the case has been beset with complexity, he cites the jurisprudential theory propounded by Ronald Dworkin. Dworkin is a 21st century American philosopher and jurist.

In his various works, he urges use of public standards while deriving right legal answers. According to him, law cannot rest on an official consensus. Reaching the right decision in complex cases is never easy. In the case at hand, the overwhelming public interest prevailed over the rights of the contemners. Also, the unauthorised scheme was jeopardising hard earned money of the blue-collar workers of India. Furthermore, this step was required to command compliance of the Sahara Group.

“Making the law work” was at the core of the approach adopted by the Supreme Court. For the most fundamental objective of any court is to ensure that the law is obeyed and implied with. Sahara, at time and again flouted the directions of Court. Therefore, the extreme step of the Court was required and it serviced as a wake-up call for the Directors of Sahara. It reiterated the serious concerns of the Court about the public money and no company or any person would get away without facing ramification.

Even in 2017, amount owed to the investors was in arrears. A bench of Dipak Misra, Ranjan Gogoi and Dr. A.K. Sikri, JJ ordered Sahara to furnish two post-dated cheques of Rs.1500 crores dated, payable on 15th June 2017 and the second one was of Rs.552.21 crores payable on 15th July 2017. The cheques if bounced, would send Subrata Roy back in custody.  The apex court also warned Roy that he might be sent to jail again if the amount was not paid. He has been granted parole till 19th June, 2017. The Supreme Court on 17th April, 2017 auctioned the ambitious Aambey Valley.



Thus, this case has been a great example in establishing the fact that safeguarding the interest and the money of the investors is the primary concern of Supreme Court in corporate scams and share-market scams. It would not condone any reckless or unauthorized use of public money by the Capitalists. Thus, in the wake of the waiting Kingfisher Scam trail, this acts as a precedent wherein the Supreme Court does not shy away from becoming the defender of public interest and piercing the corporate veil.


Call For Paper Advertisement


  1. Buy new balance Deals

    Personally Im impressed by the quality of this. Generally when I come across these sort of things I like to post them on Digg. I dont think this would be the best to submit though. I will be sure to submit something else though.

  2. cheap louis vuitton sale

    Youre so insightful, have so much real stuff to bring to the table. I hope that more people check out this and get what I got from it: chills. great job and great web publication. I cant wait to check out more, keep em comin!

  3. adidas factory

    Pretty section of content. I just stumbled upon your site and in accession capital to assert that I get actually enjoyed account your blog posts. Anyway I will be subscribing to your augment and even I achievement you access consistently rapidly.

  4. parajumpers outlet store

    Fantastic job here. I truly enjoyed what you had to say. Keep going because you absolutely bring a new voice to this subject. Not many people would say what youve said and still make it interesting. Well, at least Im interested. Cant wait to see more o…

  5. Sergio Rossi online

    Nice to be visiting your webpage again, it has been months for me. Well this article that i have been waited for so long. I need this piece of writing to complete my assignment in college, and it has same topic with your article. Thanks, great share.

  6. asics shoes online

    This post really helped me fill the gaps I had in this subject. Been looking for something like this for ages but since this topic is so obscure, not many people are knowledgeable in it. Excellent work.

  7. reebok shoes sale

    Hey! I could have sworn Ive been to this website before but after checking through some of the post I realized its new to me. Nonetheless, Im definitely happy I found it and Ill be bookmarking and checking back frequently!

  8. belstaff jackets sale

    Pretty nice post. I simply stumbled upon your weblog and wished to say that I have truly loved browsing your blog posts. After all I’ll be subscribing on your feed and Im hoping you write once more soon!

  9. reebok store

    I usually dont commonly post on many another Blogs, still I just has to say thank you for The public is the solid foundation for charity keep up the amazing work. Ok unfortunately its time to get to my work.

  10. Callaway Golf for sale

    This is such a superb source that you are offering and you provide it away for free of charge. I love seeing web sites which comprehend the importance of furnishing a top quality resource for absolutely free.

  11. dkny outlet online

    Thanks for taking the time to talk about this, I feel strongly about it and enjoy learning much more on this subject. If achievable, as you gain experience, would you mind updating your weblog with more details? Its very useful for me.

  12. ugg outlet uk

    Thank you pertaining to sharing that excellent written content on your website. I ran into it on google. I am going to check back again once you publish much more aricles.

  13. cheap puma sale

    My bro bookmarked this webpage for me and I have been reading through it for the past couple hrs. This is really going to benefit me and my friends for our class project. By the way, I enjoy the way you write.

  14. Balmain on sale

    You ought to seriously think about working on growing this web site into a serious voice in this market. You obviously have a respectable knowledge of the areas all of us are searching for on this internet site anyways and you could potentially even ea…

  15. canada goose store

    Fantastic job here. I seriously enjoyed what you had to say. Keep heading because you absolutely bring a new voice to this subject. Not many people would say what youve said and still make it interesting. Properly, at least Im interested. Cant wait to…

  16. mammut sale

    I find it to exist as a thing that really has no any importance to the current topic at hand. It is just plain odd to allow such thing to happen alas it happens anyway even when you dont want it to but thats just the way it is.

  17. patagonia outlet

    Thanks for posting this piece of writing. I’m without doubt frustrated with struggling to search out relevant and brilliant commentary on this subject. Everybody now goes to the very far extremes to either drive home their viewpoint that either: every…

  18. cheap vivienne westwood online

    This is definitely a well written post. My only issue is I am having an issue with your RSS feed . For some reason I am unable to subscribe to it. Is there anybody have an similar RSS issue? If anybody else is having the same issue please let me know S…

  19. marmot tents on sale

    Great article. This was informative to read. Im looking forward to microsoft points microsoft codes microsoft points codes microsoft points microsoft codes microsoft points codes microsoft points microsoft codes microsoft points codes

  20. marmot womens jackets sale

    Great! Thanks for post.|ipod touch 32gb 3rd generation|ipod touch best price 16gb|le creuset recipes|best shampoo for men |baci chocolate |heart shaped diamond rings|casio keyboard manual |casio compass watch |casioz25 |organic tampons |osis hair produ…

  21. cheap true religion

    Remarkable web site, Distinguished comments that I can tackle. I am shifting ahead and might apply to my current job as a pet sitter, which may be very fulfilling, however I must additional expand. All the Best

  22. barbour clothing online

    I value this informative blog. Im searching on search engines for this type of info last but not least got a high quality one. This will assist with what I am considering regarding my research for my personal college task.

  23. ecco golf shoes outlet

    My sister bookmarked this web publication for me and I have been going through it for the past couple hrs. This is really going to assist me and my friends for our class project. By the way, I enjoy the way you write.

  24. parajumpers sale kids

    Its rare for me to discover something on the net that is as entertaining and fascinating as what you have got here. Your page is sweet, your graphics are great, and whats more, you use reference that are relevant to what youre saying. Youre certainly o…

  25. fitflop shoes malaysia online

    This is a superb piece, I found your weblog browsing internet for a related theme and came to this. I couldnt come across to much supplementary information on this piece, so it was pleasant to find this one. I will certainly end up being back again to…

  26. mountain hardwear聽down jacket sale

    Took me time for you to check out all the comments, but I truly enjoyed the content. It proved to be in fact helpful to me and I’m sure to all of the commenters right here! It’s usually huge when you can not just be informed, but additionally engaged…

  27. cheap fjallraven backpack

    I think youve made some genuinely interesting points. Not as well many people would in fact think about this the way you just did. Im truly impressed that theres so significantly about this subject thats been uncovered and you did it so properly, with…

  28. barbour knitwear sale

    I wish to show my thanks to the writer for rescuing me from this challenge. As a result of surfing through the the web and getting notions which are not helpful, I figured my entire life was gone. Living devoid of the approaches to the problems you hav…

  29. fjallraven jacket sale

    informacje 3. Nastêpnie z listy menu wybieramy Konfiguracja domen. Prosimy o podanie ³¹cznego kosztu miesiêcznego brutto technik spamerskich mog¹cych spowodowaæ usuniêcie strony z Google. 4. Nastêpnie z listy wybieramy domenê dla której chcemy przypisa…

  30. sergio rossi shoes on sale

    Well, that is my very first visit on your weblog! Were a group of volunteers and beginning a model new initiative in a group inside the same niche. Your weblog supplied us helpful data to work on. You might have carried out a marvellous job! Anyway, in…

  31. ralph lauren outlet store

    I carry on listening to the news lecture about getting boundless online grant applications so I have been looking around for the finest site to get one. Could you tell me please, where could i get some?

  32. Mountain Hardwear jackets online

    Its in truth a great post. I am sure that anyone would like to visit it again and again. After reading this post I got some very unique information which are in fact very helpful for anyone. This is a post owning some crucial information. I wish that i…

  33. lk bennett shops

    I used to be very happy to seek out this site.I wanted to thanks for this nice learn!! I definitely enjoying every little bit of it and I have you bookmarked to take a look at new stuff you post. Anyway, in my language, there are usually not a lot good…

  34. Mulberry Bags Outlet

    This is a different sort of opinion that many people dont usually talk about. Generally when I come across these sort of things I like to post them on Digg. This article probably wont do well with that crowd. Ill take a look around your site though and…

  35. oakley for sale

    Woah! Im really digging the template/theme of this site. Its simple, yet effective. A lot of times its difficult to get that perfect balance between usability and visual appeal. I must say that youve done a excellent job with this. Additionally, the bl…

  36. michael kors coupon code 2016

    Thanks for taking the time to discuss this, I really feel strongly about it and love learning extra on this topic. If doable, as you achieve expertise, would you mind updating your weblog with further info? It is extremely helpful for me.

  37. fake balmain dresses

    I admire the useful information and facts you provide in your content. I will bookmark your weblog and also have my kids examine up right here normally. I am very certain theyll learn a lot of new stuff here than anyone else!

  38. buy ugg online

    Strange this post is totaly unrelated to what I was searching google for, but it was listed on the first page. I guess your doing something right if Google likes you enough to put you on the first page of a non related search.

  39. keen shoes online

    Youre so right. Im there with you. Your blog is surely worth a read if anyone comes throughout it. Im lucky I did because now Ive received a whole new view of this. I didnt realise that this issue was so important and so universal. You unquestionably p…

  40. parajumpers outerwear

    i was reading throught some of the posts and i identify them to be plumb interesting. apologetic my english is not exaclty the exceptionally best. would there be anyway to transalte this into my argot, spanish. it would actually help me a lot. since i…

  41. cheap belstaff

    hello there and thank you for your information – I’ve certainly picked up something new from right here. I did however expertise several technical issues using this website, since I experienced to reload the website many times previous to I could get…

  42. ecco shop

    quality information I will bookmark this and keep an eye on updates. I dont know if my comment is going to pop up because Im not very tech savvy, hopefully I can get this right!

Leave a Reply