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Oasis visible in the desert? SC allows Sahara to part-pay by bank guarantee

The Supreme Court on Friday allowed Sahara to arrange a bank guarantee of Rs. 5,000 crore in the favour of the capital market regulator to comply with the conditions for the release of its chief Subrata Roy and two other directors who are in custody in Delhi’s Tihar jail since March 4, 2014.

A bench of Justice TS Thakur, Justice Anil R Dave and Justice AK Sikri allowed Sahara to go ahead with arranging the guarantee from a scheduled bank, after amicus curiae Shekhar Naphade and senior counsel Arvind Datar appearing for the Securities and Exchange Board of India (SEBI) okayed the format while informing the court that Sahara have not disclosed the bank’s name.

The apex court by its March 26, 2014 order had said that Sahara would be paying Rs.10,000 crore towards refund of the investors money out of which Rs.5,000 crore would be in cash and Rs.5,000 crore in bank guarantee. The court had said this this too would be condition for the release of Roy and two other directors - Ashok Roy Choudhary and Ravi Shankar Dube - from judicial custody.

On Friday, the court did not accept the SEBI’s submission that the encashment of the bank guarantee, which Sahara would be furnishing, would be subject to the time frame in which it would be making full payment of the balance amount of the investors money as ordered by the court August 31, 2012.

The court also did not accept SEBI’s submission that the acceptance of Rs. 10,000 crore - Rs. 5,000 crore cash and Rs.5000 crore bank guarantee - was subject Sahara indicating the time line in which they would refund the balance amount.

Senior counsel Kapil Sibal, appearing for Roy, contested SEBI’s position saying what was being said by the market regulator was not flowing from March 26, 2014 apex court order.

The court accepted Sahara’s proposition, given by Sibal, that the bank guarantee shall only be encashed by the market regulator upon the directions of the court.

The apex court by its August 31, 2012 order had asked Sahara group’ss two companies - Sahara India Real Estate Corp Ltd. (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) - to return investors Rs. 24,600 crores along with 15 percent interest.

Two Sahara companies had mopped up this money from investors through optionally fully convertible debentures (OFCSs) in 2007 and 2008.

The court fixed May 14 as the next date of hearing as Sibal said that they would tell the court about the steps taken by the Sahara to comply with the court’s March 26, 2014, directions.

On the next hearing, the court will also hear Sahara’s plea that it may be allowed to retain with it the excess amount that it would get from the proceeds of its transactions to raised Rs. 10,000 crore for the payment of the statutory dues and employees’ salaries and depositing of their provident fund dues.

As SEBI counsel Arvind Datar red-flagged the plea, the court told him that all the assets of Sahara are under freeze and they have to discharge their statutory obligations.

Telling Datar that discharge of statutory obligations take precedence over their liabilities, the court said that it would consider the plea on the next hearing.

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