Sahara lands in another trouble, Supreme Court fiat on diversion of funds

New Delhi: Facing tough times in its attempt to get its Chief Subrata Roy out of jail, Sahara Group on February 24 landed in a soup again as the Supreme Court asked it to explain how it encashed securities, deposited with RBI, and diverted them to pay depositors to the tune of Rs 484 crore without the court's nod.

The apex court also allowed Reserve Bank of India (RBI) to initiate action against Sahara India Financial Corporation Ltd (SIFCL), a non-banking financial firm, for allegedly "breaching" the central bank norms by encashing securities and diverting them to Sahara India, a partnership firm, for paying the depositors instead of depositing the amount in the SEBI- Sahara refund account as directed by it.

A bench headed by Justice T S Thakur, which restrained the Group from further alienating and transferring remaining "directed securities" of SIFCL, sought a response as to how they diverted the money to the tune of Rs 484.67 crore despite a specific direction against it by the court on July 4, 2014.

"We never allowed you to encash the securities and to pay the amount to the depositors. Rather, you should have deposited them into the SEBI-Sahara account," the bench, also comprising justices A R Dave and A K Sikri, said.

This has been specifically mentioned in the auditor's report of the firm, the court said but senior advocate S Ganesh, appearing for Sahara, disputed the auditors' findings. The bench took serious note of the diversion of funds saying, "how could you sell the identified securities? How can you touch these securities?...You should have come to us seeking permission to pay to the depositors. "We had vacated the order to enable you to deposit the money in the SEBI-Sahara account. You should have come clean on that."

The court further asked the counsel for Sahara to file an additional affidavit indicating as to how the disbursements of the money to the depositors have been made and what was the mode of payment--cheque or cash--and the company will also disclose the identity of the recipients. The details have to provided by the Sahara Group in the form of compact discs to the court, SEBI, RBI and senior advocate Shekhar Naphade who is amicus curiae in the matter.

The bench, which asked RBI to pass an order after hearing the Sahara Group, however, did not give any relief to Roy for further using Tihar jail's conference room and facilities for negotiating deals with prospective buyers of the Group's properties for raising money to the tune of Rs 10,000 crore to ensure his release.

The court, which had asked 65-year-old Roy to pay Rs 10,000 crore to get bail, out of which Rs 5,000 crore should be paid in cash and rest in bank guarantee, had on January 9 extended the facilities its August 1, 2014 order for conference facility for him in Tihar jail to deal with the nitty-gritty of the transaction till February 20 this year.

The bench posted the matter on March 13 asking SEBI and other parties to respond to Roy's plea for extension of facilities inside the prison at least by two working weeks to explore negotiations with prospective parties including European Bank and Dutch Pension Fund with whom the group was in exploratory stage.

While observing that enough opportunities have been given to the group for arranging the money, the bench said it appears that it (group) was not preferring to sell its domestic immovable properties like Aamby Valley which it has been saying would fetch monies in crores of rupees.

"Why don't you transfer your properties? Why don't you sell properties like Aamby Valley etc? Come out with some proposal. You are planning business above your personal liberty," the bench observed. The bench, during the hearing, also took exception that instead of transferring the unclaimed matured deposits in the government treasury, it diverted the money and even gave loan to other partnership firm of the group.

"They are very lucky. They take up from depositors who never turn up," the bench said adding, "when within seven years the claimant of money does not turn up or are untraceable that money goes to the government treasury. Instead you diverted it."

"Your problems are increasing and that it is because of your own doings. You have one more opponent to contest with," the bench said referring to the allegations by the RBI. Earlier, Roy, on February 20, had failed to get an urgent hearing of his plea that his facilities inside the jail be extended. The court on February 24 allowed RBI's plea to implead itself as a party in the company's tussle with SEBI.

In an application, Reserve Bank of India (RBI) had urged the apex court to restrain SIFCL from utilising any of its assets, including securities for paying dues to SEBI on the ground that SIFCL is Residuary Non-Banking Financial Firm and fell under its (RBI) regulatory control. Prior to this, the Sahara group had informed the apex court that the proposed transactions for a loan of around US dollar 1,050 million from abroad for raising Rs 10,000 crore to ensure Roy's release from jail had failed.

The apex court, on January 9, had allowed Sahara Group to go ahead with its proposed transactions with some conditions including the approval of RBI for the transfer of the funds raised in the US to India to meet the requirement set for release of Roy, who is lodged in Tihar jail since March 4 last year for non-refund of over Rs 20,000 crore with interest to depositors.