On Thursday(5th September),The Supreme Court directed Sahara Group to deposit Rs 1,000 crore into an escrow account within 15 days and permitted a joint venture to develop its Versova land, aiming to realize Rs 10,000 crore. This amount is required to be deposited into the SEBI-Sahara refund account to return investors’ money as per a 2012 court order.
Thank you for reading this post, don't forget to subscribe!
NEW DELHI: The Supreme Court of India on Thursday(5th September), directed the Sahara Group to deposit Rs 1,000 crore into a separate escrow account within a span of 15 days. This decision is part of ongoing efforts to facilitate the recovery of investor funds, following the apex court’s 2012 order. Additionally, the court has permitted the Sahara Group to enter into a joint venture (JV) for the development of its valuable land at Versova in Mumbai, which could potentially generate Rs 10,000 crore.
The Supreme Court’s direction is significant as it paves the way for the Sahara Group to initiate land development projects while ensuring the deposit of funds for investor refunds. The Rs 10,000 crore, which the group expects to realize through the Versova land development, will be deposited into the SEBI-Sahara refund account to repay investors.
Joint Venture or Sale: The Court’s Conditions
The bench, comprising Justices Sanjiv Khanna, MM Sundresh, and Bela M Trivedi, made it clear that if the joint venture or development agreement is not submitted within 15 days, the court will proceed with selling the 12.15 million square feet of Versova land on an “as is where is” basis.
“We grant SIRECL and SHICL (both Sahara Group companies) 15 days to comply with the court’s statement made today. If the joint venture or development agreement is not filed within this period, the court may proceed to sell the Versova land on an ‘as is, where is’ basis.”
– the court stated in its order.
This ultimatum signifies the court’s intent to enforce strict timelines, given that the Sahara Group has been under scrutiny for non-compliance with previous orders.
Rs 1,000 Crore in Escrow Account
The Rs 1,000 crore, to be deposited by a third party, will be placed in an escrow account. This provision ensures that, in the event the court does not grant approval for the joint venture agreement, the amount will be refunded to the third party involved.
“The Rs 1,000 crore deposited by a third party will be held in an escrow account. If the court does not grant approval or permission for the joint venture agreement, the amount will be refunded to the third party.”
-the bench noted.
The court’s decision to secure the funds in escrow reflects its commitment to ensuring that the interests of both investors and third parties are protected.
While these measures are being set into motion, the Supreme Court has listed the matter for further hearing after a month. This pause allows Sahara time to comply with the court’s conditions while simultaneously allowing the court to monitor the progress made in the joint venture agreements or alternative measures, such as the sale of land.
In addition to the Versova land, the Supreme Court has granted permission to the Sahara Group companies, Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL), to pursue joint venture agreements for the development of other properties. This includes the high-profile Aamby Valley project in Mumbai, which has been a subject of attention in the past due to its value and potential for revenue generation.
“The two companies (SIRECL and SHICL) are allowed to negotiate joint venture or development agreements for other properties. However, they must obtain the court’s permission before finalizing any such agreements.”
-the court clarified.
This broader allowance for entering joint ventures demonstrates the court’s willingness to offer the Sahara Group opportunities to meet its financial obligations, but with strict judicial oversight. By allowing these ventures, the court is effectively providing Sahara with the chance to generate substantial revenue, but under the condition that it continues to prioritize the refunding of investors’ money.
Sahara Group’s Troubled History with Investor Refunds
The Sahara Group’s financial troubles have been well-documented. In 2012, the Supreme Court had ordered the group to deposit approximately Rs 25,000 crore to refund investors. However, since then, the group has been embroiled in legal battles and has struggled to comply fully with the court’s directives.
Pointing to the group’s long-standing non-compliance, the bench remarked that Sahara is in “deep trouble” for not adhering to the court’s orders over the years. This latest decision by the Supreme Court is seen as a critical step in ensuring that the group takes meaningful actions to rectify its past failings.
“The Sahara Group is in serious trouble for failing to comply with the Supreme Court’s order since 2012.”
– the bench observed.
The Supreme Court has reiterated that any proceeds from the sale of properties by the Sahara Group must be deposited in the SEBI-Sahara refund account. This directive comes after a long-standing legal battle between the Sahara Group and the Securities and Exchange Board of India (SEBI) over a disputed sum of Rs 25,000 crore.
In its ruling, the court stated-
“The sale transaction should be at or above the circle rate, or up to 10 percent below it. If the transaction is 10 percent below the circle rate, prior court permission must be obtained.”
emphasizing the conditions under which Sahara’s assets could be sold. The court’s order followed a full day of hearing arguments from both SEBI and Sahara’s legal teams.
Addressing senior advocate Kapil Sibal, who represented the Sahara Group of companies, the bench said-
“You are in serious trouble, but we’re still offering you a chance. Even after 10 years, we are giving you an extended opportunity. Despite a decade passing, there has been no progress, and we are still at the same point we were 10 years ago.”
The legal case has its origins in several earlier court orders, including rulings from June 19, 2012, August 31, 2012, and December 5, 2012, which directed the creation of the SEBI-Sahara refund account to collect funds from Sahara. These funds were meant to be refunded to investors who had put their money into Sahara’s financial schemes.
Despite efforts by Sahara to challenge these rulings, the court noted that –
“No reasons or grounds have been provided for the court to reconsider the orders and directions given on August 31, 2012, which have reached finality, as the review plea was also dismissed on January 8, 2013.”
As per SEBI’s 23rd status report, Rs 15,569.27 crore has already been deposited into the SEBI-Sahara refund account, leaving a significant shortfall. SEBI contends that the Sahara Group’s principal liability stands at Rs 25,781 crore, while Sahara disputes this figure, claiming it owes Rs 24,029.73 crore.
During the hearing, Sibal proposed a roadmap for Sahara to clear its liabilities. He suggested that the Sahara Group would develop its land assets in Versova and Aamby Valley, located in Mumbai, through joint ventures over the next one and a half years. As a show of good faith, the company offered to deposit Rs 1,000 crore within 10 days.
However, the court was not satisfied with this proposal. It responded-
“We do not accept your proposed one-and-a-half-year timeline. It has been over 10 years with no progress. You must deposit Rs 1,000 crore within 15 days and finalize a joint venture within this period, or we will appoint a court receiver to take over the land and put it up for sale.”
The court’s firm stance highlights the urgency of the case, which has seen over a decade of stalled legal proceedings. SEBI’s counsel, senior advocate Arvind Datar, noted that Sahara had previously submitted a list of 32 properties in a sealed cover and suggested that if the Versova and Aamby Valley ventures fail, the court might consider selling these properties to recover the dues.
“If the developments at Versova and Aamby Valley do not proceed as planned, the court may consider opening the sealed cover and selling the 32 properties listed therein.”
– Datar said.
The legal saga between Sahara and SEBI dates back to the 2012 Supreme Court order, which required Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) to refund money to investors. The court had mandated that the refund be made with an interest rate of 15 percent per annum from the date of receiving the subscription amount until repayment. The amount was to be deposited with SEBI within three months.
The legal proceedings have also been impacted by the passing of Sahara Group chief Subrata Roy. In November 2023, Roy, who had been ordered by the Court to be taken into custody in relation to the matter, passed away at a private hospital in Mumbai. Roy’s death adds a layer of complexity to the already protracted case, though it is unlikely to significantly alter the Court’s directives towards the Sahara Group.