SEBI bans Sahara promoters from raising funds

The Securities and Exchange Board of India (SEBI) has restricted the promoters and directors of two Sahara group companies from raising any capital through the issue of securities until further orders.

The names of Subrata Roy Sahara, Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary are listed in documents as the concerned promoters or directors.

The order comes as a result of the company not providing adequate disclosures concerning its  raising of money from investors through sale of convertible debentures Sahara Prime City had filed an offer document in Septmeber 2009 for a proposed initial public offer.

SEBI had received complaints that the disclosures in the offer document do not mention the issuance of convertible bonds by two group companies to the public.

These instruments had face values from Rs5,000 to Rs24,000, maturity periods from 48 to 180 months and varying redemption values and conversion options.

The total amount raised by the two companies through these instruments was not available but the total cost of projects that the two companies were raising money for has been listed as `40,000 crore.

Abhijit Sarkar, a Sahara spokesperson said the order is very unreasonable and arbitrary.

“They have taken wrong action against us with sole allegation that we have not supplied the document they asked for, he said, adding, “We have written earlier in this regard where it is clearly mentioned that this OFCD matter is definitely out of the jurisdiction of Sebi and we had given them clear opinions that it is a ministry of corporate affairs matter.”   

“It is crucial to probe into how the companies could have raised huge amount of money running into thousands of crores without conforming to prudent disclosure norms that govern public issues,” said the SEBI order.

“Prima facie, it appears that in the guise of private placements, these companies are rampantly tapping huge amount of money by not disclosing the source of funds by circumventing the applicable framework of law,” it said.

The order restrains Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd from raising money through issue of equity shares, convertible debentures or any other securities.

The two companies have also been directed to show cause as to why action should not be taken against them which might include asking that money they have already raised be returned to investors.

The order which was passed on Wednesday and is signed by K M Abraham, whole time member of SEBI, comes into force with immediate effect.