Subrata Roy to stay in jail as Supreme Court gives Sahara 18 months to pay back its depositors

The Supreme Court today delivered its judgment in the contempt petition filed by SEBI against Sahara. The Court throughits judgment allowed Sahara to sell certain properties in UP and ordered the proceeds to go to SEBI-Sahara Refund Account after adjusting transaction cost and taxes.

The Court however declined to unfreeze the accounts of the Group, saying that the Sahara Group can use the surplus amount it has after it complies with the order of the Supreme Court by which it had fixed the bail amount of Mr. Subrata Roy and others at Rs. 10,000 crore. The Court in its judgment also gave the format for the Bank Guarantee of Rs. 5,000 crores which is to be produced by Sahara to fulfil the bail requirements.

In the judgment delivered by the three judge bench consisting of Justices Sikri, TS Thakur and Anil Dave the Court also observed, “contemnors/applicants  have  failed  to  give satisfactory proof of redemption of  ₹17,400 crores by SIREC Land ₹5,442 crores for SHICL” and accordingly refuted the claim made by Sahara.

Noting the circumstances in which the Contempt Petition was filed by SEBI before he Apex Court, the Court observed “It so happened that Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) (hereinafter referred to as the 'Saharas') invited and claimed to have collected deposits from general public who, allegedly, included cobblers, labourers, artisans, peasants etc. This invitation for deposit was in the form of 'Optional Fully Convertible Debentures' (OFCD). SEBI found that  offering  of  such  OFCD  was  not  legally  permissible  and passed orders directing Saharas not to offer their equity shares/OFCDs or any other securities to the public or invite subscription in any manner whatsoever either directly or indirectly.”

The matter thereafter had reached Courts wherein even the Supreme Court ordered Sahara to pay back its depositors. However, Sahara failed to comply with the orders of the Apex Court and eventually, the Supreme Court ordered non-bailable warrants against Mr. Subrarta Roy and two others.

Hearing the bail plea on March 23, 2014, the Apex Court had ordered the bail amount to be fixed at Rs. 10,000 crore. However, till date, the Sahara group has failed to deposit that amount.

The Supreme Court also observed, “During this period, certain properties have been sold and the amount realised there from stands deposited in the SEBI – Sahara Refund Account” and that, “according to the applicants, they are at the verge of fulfiling the conditions imposed by the orders dated 26.03.2014.”

Regarding the time period for which Mr. Subrata Roy and two others have been in jail, the Court said, “This Court feels concerned with the fact that three persons are deprived  of  their  liberty  for  the  last  fifteen  months  and  this situation is quite onerous to them.  On the other hand, public interest as well as public good demands that the two Sahara Companies, which had collected whopping amount of more than22 ₹ ,000 crores from the public in an illegal and unauthorised manner, are made accountable for the same in the manner it is directed vide orders dated 31.08.2012 and 05.12.2012.  By any yardstick, this is a huge liability, which the contemnors are boundto discharge by depositing the same with SEBI.”

Laying down the roadmap for the payment of Rs.36,000 crores by Sahara, the Apex Court said, the contemnors shall deposit the balance outstanding amount within a period of18  months  commencing  from  the  date  of  their  release  from custody in nine installments. First eight instalments shall be ofRs.3,000 crores payable every two months from the date of their release  from  custody  and  last  instalment  shall  be  of  the remaining amount.” It added, In the event of the default in payment of two instalments(not necessarily consecutive) the bank guarantee furnished by the  contemnors  pursuant  to  the  order  of  this  Court  shall  been cashed by SEBI and the amount so received counted towards part compliance with the earlier directions given by this Court.”

The Apex Court also observed, “In the event of failure of the contemnors to deposit three instalments (not necessarily consecutive), the contemnors shall surrender back to custody and in case they fail to do so, they shall be taken into custody and committed to jail.”

It also directed the persons currently lodged in jail to deposit their passports within 15 days from the date of their release from jail and that they will require permission of the Supreme Court to go out of country.”

However, Sahara was not able to produce the Bank Guarantee today and accordingly, the three judge bench ordered that Mr. Subrata Roy will stay in jail till the bank guarantees are submitted to the Court.

Justice TS Thakur also observed that the judgment was delivered only after it was assured that the bank guarantees would be submitted. To this, Senior Advocate Kapil Sibbal submitted, Yes, but the bank backed out after media reports came out on the proceedings." He also said that it would be tough for Mr. Roy to pay up without getting out of jail.

Mr. Sibal also submitted, “As a goodwill gesture, please release him. Please give six weeks time to him and he be sent back to jail if he does not do the needful,” and added, keeping him in jail does not serve any body’s purpose”. However, the Bench responded by saying, “Please do not feel that we are insensitive… and for last 16 months, we had been asking your client about the payment of money. This is not an ordinary case and its a case of its own kind. This man is in jail for the last 16 months…how do you ensure that money is recovered…”

The Court also agreed to allow the conference hall facilities available to Mr. Sahara for another eight weeks.

You may read Livelaw’s coverage of the case here.

Read the Judgment here.