Supreme Court Permits Sahara to Proceed with Foreign Loan Transaction

The Supreme Court yesterday permitted Sahara group of companies to go ahead with its proposed loan transactions of around US 1050 million dollar from abroad for raising Rs 10,000 crores for releasing Mr. Subrata Roy on bail  from the jail.

Further the court has directed the company to seek clarification from the Reserve Bank of India (RBI) to raise loan of $650 million (4,000 crore) from US based Mirach Capital Group LLC through a Mauritius based company. The bench headed by Justice T S Thankur and comprising Justices A R Dave and A K Sikri, said the entire loan amount generated from the US shall be deposited with Aamby Valley Ltd, Mauritius and shall not be utilised or transferred by the Indian subsidiary, for any other purpose except for being deposited with SEBI in the SEBI-Sahara refund account

 The apex court has even asked the Central transaction to examine and give their views in 2 weeks on the company’s application whether the transaction would comply with the Foreign Exchange Management Act (FEMA) and related regulations “as expeditiously as possible”.

Meanwhile the company can go ahead with the offshore transaction where Mirach can transfer the loan amount to Aamby Valley (Mauritius) Ltd, the holding company that owns stakes in the entities that control hotels in New York and London. Mirach will also separately transfer $400 million to Aamby Valley Mauritius for equity investments into Sahara Hospitality, another group entity.

After considering the arguments from the company and the Securities and Exchange Board of India (SEBI) the bench headed by Justice T S Thankur passed an order that as these transactions happen outside the country, they would not attract any local laws and there is no risk for the court in allowing the transaction of the loan.

The bench has also clarified that it will not let Sahara free to claim any equity on the amount raised as loan overseas and deposited with Aamby Valley Ltd. for the purpose of jail of Mr. Roy.

Sahara's counsel S Ganesh, Rajiv Dhavan and Keshav Mohan had also made a submission to allow the company for taking over of the Bank of China loan on foreign Hotels by another creditors.

Mr Roy and two other Director Ashok Roy Choudhary and Ravi Shankar Dubey were sent to jail last year on 4, March.

During that time court clarified that the legal impediments in the transfer of money from escrow account of foreign bank agent requires special permission by competent authority under the Foreign Exchange Management Act (FEMA).

Amicus curiae ShekarNaphade had cropped the issue as Sahara companyhad not complied with the legal requirement for external commercial borrowing which necessitates clearance under FEMA. Sahara argued that there was no requirement of RBI approval under the FEMA regulations in the concerned transaction.

The other issue in front of the court was about the company seeking its nod for raising 'junior loan' of USD 650 million (approx. Rs 3,600 crore) as a part of the scheme to overcome the liability with Bank of China which had lent money to it in purchasing stakes in three overseas hotels, Dream Downtown and The Plaza in New York and Grosvenor House in London. The company informed the court about the shift of the escrow account to Bank of America.

On 2 December 2014 Supreme Court permitted Sahara to sell their four domestic properties for the release of Mr. Roy. The properties were likely to fetch Rs 2,710 crore, in its bid to raise Rs 10,000 crore 17 December 2014 the company handed over to SEBI cheques amounting to Rs 1,900 crores relating to sale of domestic properties. When the court was satisfied that the transaction was in accordance with the 4 June, 2014 orders then it allowed the group to sell properties in Jodhpur, Pune, Chauma in Gurgaon and Vasai in Mumbai.

The bench was told that there were some problems in selling the Pune property which would likely to fetch Rs 550 crore. Earlier the court was told that the transactions for these properties would be completed by May 2015 and in the meantime, the purchasers would deposit post-dated cheques in the name of SEBI-Sahara refund account with undertakings that those would be honoured on due dates.

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Out of the list of nine domestic properties, Sahara has already sold its Ahmedabad property and has raised Rs 411.82 crores which has gone into the account of SEBI.

Sahara, which earlier had raised Rs 3,117 crore and deposited with SEBI, has told the court that out of nine domestic assets it has now sold an Ahmedabad property and raised Rs 411.82 crores which has also gone into account of the market regulator.

Earlier, SEBI had moved the court seeking its direction to Sahara group to give a time schedule for payment of Rs 47,000 crore to it.

You may read more news about Sahara here.