Market regulator, SEBI, yesterday ordered two companies of the Sahara Group to return the money they had raised from investors through the issuance of six optionally fully convertible debentures (OFCDs) for not adhering to laws.
According to SEBI, it ordered Sahara Commodity Services Corp Ltd, known as Sahara India Real Estate Corp Ltd, and Sahara Housing Investment Corp Ltd to return the money as the two companies had "mobilised huge public money in the guise of private placements" without adhering to the regulatory framework.
The two companies were also ordered by the regulator to pay interest at the rate of 15 per cent per annum from the time of the receipt of the money from investors till disbursement.
OFCDs are bonds issued to investors with which they get the option to fully convert the debt repayable by the company into equity shares.
The Sahara Group companies had argued before the courts the bonds were privately issued and were therefore not in the purview of the market regulator. Further the companies said the bonds issued by the companies were neither shares nor debentures in the strict sense.
SEBI countered the claim of private issuance by pointing out that the OFCDS had been issued to 6.6 million. Further it said OFCDs did come under the definition of bonds which were under the purview of the regulator.
The two companies have also been barred from raising funds from the securities market till they repay investors. Further the chairman of the Sahara group, Subrata Roy Sahara and other directors of the companies have been barred from associating with any listed firm or a company which intends to raise money from the public till investors are repaid.