Supreme Court Reluctant To Allow ED Attachment Of Sahara Properties, Says Investors Will Get Nothing

During the hearing of contempt pleas filed against Sahara India, the Supreme Court yesterday called on the conglomerate to place before it a scheme as to how it plans to deposit the outstanding sum in the Sahara-SEBI Refund Account. The Court also asked the company to give a list of its unencumbered properties.

The matter was before a bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi, which heard it for almost the entire day and listed it again on September 4. The hearing witnessed substantial arguments on how the amount remaining to be deposited by Sahara can be recovered.

To recap briefly, in 2012, the Supreme Court ordered two Sahara companies to refund Rs. 25,000 crores (approx.), along with 15% interest, to over two crore small investors who invested in their debentures between 2008-2011. The deposit was directed to be made with SEBI.

When the directed amount remained outstanding, pleas were filed against Sahara, alleging contempt.

Yesterday, Senior Advocate Kapil Sibal (on behalf of Sahara) pleaded that Sahara wants to discharge its obligation and is entitled to receive a certain value for its properties. However, Justice Trivedi remarked, "These promises were given 10 years back, not fulfilled and therefore, we are at this stage. Contempt was issued".

Justice Khanna on the other hand opined that Sahara being a judgment debtor, the Court is entitled to attach its properties and sell them. The judge added that the judgment debtor's claims of getting a price can be factored in, but the Court will not await any particular event/situation.

It was further orally observed that the Court's order directing Sahara to make the deposit was a decree and the same was not complied with. Insofar as it was Sibal's case that Sahara did not have a fair chance to sell its properties, Justice Khanna said that the stance was prima facie incorrect: "Earlier, they (petitioners) were trying to sell the properties. They were not able to do so. You have been given complete freedom, free arm to sell the properties at circle rate, at 10% less than the circle rate, and even below 10% the circle rate with the permission of the Court. So, to say that you do not have a free arm is wrong".

Pertinently, certain applications were filed by ED before the court pursuant to a criminal complaint by SEBI. In this regard, Sibal claimed that even as per SEBI, there was no scheduled offense on the relevant date, as the transactions in question took place prior to 2013.

While considering the applications, which sought permission to pass attachment orders, Justice Khanna orally said,

"To be very frank, if we allow PMLA to commence, all the investors will get zero. Enforcement Directorate also has to realise which cases they have to move, which cases they should restrain themselves. Because as long as the Supreme Court is taking care in ensuring that ill-gotten money is not taken care of, that's fine. They don't have to always, as per their stand before us, attach a property to proceed under PMLA".

No orders were however passed as nobody was present on behalf of ED to press the applications.

During arguments, the Court notably clarified that Sahara will have to be involved in the process of selling of its properties. Reference was also made to SEBI's claim that the deposits made were fictitious, benami transactions; however, Sahara's counsels strongly objected to the same.

Justice Khanna also orally said that if Sahara wants some amount to be paid out of the SEBI-Sahara Account, it may move an application and it will be considered.

Case Title: Securities and Exchange Board of India v. Subrata Roy Sahara and Ors., Conmt.Pet.(C) No. 1820-1822/2017 in Conmt.Pet.(C) No. 413/2012 in C.A. No. 9833/2011 (and connected matters)