- Category: Market News
- Created on Sunday, 04 September 2011 21:30
- Published on Sunday, 04 September 2011 21:30
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In a move that may spell more trouble for Sahara group of companies — Sahara Real Estate Corporation Ltd and Sahara Housing Investment Corporation Ltd — the ministry of corporate affairs (MCA) has expressed its support to market regulator Sebi’s June 23 order against the two companies. In an affidavit, the ministry states that both Sebi and MCA work in tandem as the objective is to protect small investors. “Both Sebi and MCA work in tandem for protecting rights of small investors. So the question of technicality of jurisdiction is not the way to look at the issue,” the ministry said in the affidavit filed before the Securities Appellate Tribunal (SAT), sources told The Indian Express.
SAT is scheduled to hear the matter on Monday as per the directions of the Supreme Court on July 15 wherein the apex court had asked the Sahara group companies to approach SAT against the Sebi’s order. The order asked the entities to return the money they had raised from investors through the Optionally Fully Convertible Debenture (OFCD) scheme within three weeks along with a 15 per cent interest. The Sahara group firms had approached SAT after the directions. A three-member bench, headed by Chief Justice S H Kapadia had also directed SAT to decide on the appeal of Sahara Real Estate Corporation Ltd against the Sebi order within eight weeks. The SC also directed the corporate affairs ministry to be a party in the matter keeping in mind the issue of jurisdiction on OFCDs.
Earlier, MCA had told the Allahabad high court that the Registrar of Companies (RoC) under the ministry would have jurisdiction and not the market regular. “Sebi Act is a specialised act and Companies Act is a basic act. Therefore the Sebi Act should prevail over the Companies Act,” the ministry is believed to have written in the affidavit filed on August 26. The ministry has also pointed out that the order passed by Sebi is not under section 55A of the Companies Act that defines the power of the market regulator. It sets aside a working demarcation of the areas that are given to Sebi and those set aside for being administered by the central government.
The ministry of corporate affairs has said the Sebi order is as per section 11 of the Sebi Act that empowers it to regulate all matters relating to the issue of securities, without prejudice to the Companies Act and hence the issue of jurisdiction does not arise. The issue pertains to Sebi’s finding in November that two Sahara Group firms were raising funds from the public through OFCD scheme without conforming to prudent disclosure and other investor protection norms. The Sahara Group had contested Sebi’s authority to look into the issue in the Supreme Court arguing that it was a privately held company and not a public one. Therefore, it was under the jurisdiction of the ministry of corporate affairs....