SAT Upholds SEBI Action Against Sahara Firm In ₹14,106 Crore OFCD Case

The Securities Appellate Tribunal (SAT) has upheld regulatory action taken by the Securities and Exchange Board of India (Sebi) against Sahara India Commercial Corporation Ltd (SICCL) in connection with the issuance of optionally fully convertible debentures (OFCDs).

In its order dated March 9, the tribunal dismissed appeals filed by the company and its directors challenging Sebi’s October 2018 directive that required the firm to refund money raised through the debentures and disclose details of its inventory. The earlier Sebi order had also barred certain officials from accessing the securities market.

The three-member SAT bench held that the OFCDs issued by the Sahara group firm between 1998 and 2008 constituted a public offer, thereby falling within Sebi’s regulatory jurisdiction.

Tribunal Says OFCD Issue Was a Public Offer

According to the tribunal’s findings, SICCL mobilised around ₹14,106 crore from nearly 1.98 crore investors through the debentures during the period. The bench observed that raising funds from such a large number of investors could not be categorised as a private placement, as claimed by the company.

SAT noted that after amendments to the Companies Act in 2000, any offer made to 50 or more persons is deemed a public issue and must comply with regulatory requirements applicable to public offerings, including listing and disclosure norms.

The tribunal therefore ruled that Sebi had the authority to regulate the debenture issuance and take enforcement action.

Tribunal Rejects Sahara’s Repayment Claim

Sahara argued that a majority of the funds collected through the OFCDs had already been repaid to investors. However, the tribunal rejected this contention, stating that the company failed to provide credible proof of such repayments.

SAT observed that a certificate issued by a chartered accountant alone was insufficient to establish that funds had been returned to nearly two crore investors. The bench said proper documentation and verifiable evidence would have been required to support the claim.

No Delay in SEBI’s Investigation

The tribunal also dismissed Sahara’s argument that Sebi had initiated proceedings after an unreasonable delay.

According to the bench, the regulator began examining the matter after reviewing related cases involving Sahara group entities and receiving inputs from the Ministry of Corporate Affairs. Therefore, the timing of the regulatory action could not be considered unjustified.

While dismissing the appeals filed by SICCL and its directors, the tribunal allowed a separate appeal filed by certain managers and the company secretary. It held that employees could not be held liable for decisions taken by the company’s management.

Read more: Cabinet Eases FDI Rules For Small Investments From China, Other Neighbouring Countries.

Conclusion

The SAT ruling reinforces Sebi’s regulatory authority over large-scale fund mobilisation schemes that effectively operate as public offerings. By upholding the watchdog’s action in the ₹14,106 crore OFCD case, the tribunal has reiterated that companies raising money from a broad base of investors must comply with disclosure, listing, and investor protection norms under securities market regulations.

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