The Sahara group on Thursday, September 15, said the Law Ministry had last year taken a view that the Securities and Exchange Board of India (SEBI) did not have jurisdiction over unlisted firms.
SEBI had directed two Sahara group firms to refund Rs 17,656 crore raised by issuing Optionally Fully Convertible Debentures (OFCDs) to investors. The firms have challenged the order at the Securities Appellate Tribunal (SAT).
Fali S Nariman, senior counsel for Sahara India Real Estate Corporation, produced a copy of the file where then law minister Veerappa Moily had put a note saying he agreed with the view of the solicitor-general, Mohan Parasaran. The latter’s view was that unlisted firms came under the jurisdiction of the ministry of corporate affairs (MCA). Nariman said the company got the copy of the ministry file from a journalist through email.
The tribunal, however, observed that since the opinion was given by Law Ministry on a request by the MCA, it need not be held as the decision of MCA itself in the matter. It directed the MCA counsel to state if there was any decision taken based on this opinion.
Interestingly, Moily has now become the Minister of Corporate Affairs. Under him, the MCA has taken a decision to support SEBI’s powers to pass orders against the two unlisted firms, Sahara India Real Estate Corporation and Sahara Housing Investment Corporation. Sahara contends public authorities cannot change their stands at will and must explain the reason for such change, if they did.
Later, Sahara’s arguments revolved around the crucial Section 55A of the Companies Act, which has been analysed threadbare at the SAT over the past couple of weeks. According to them, Section 55A limits the jurisdiction of SEBI to listed companies and those which intended to list. It excluded unlisted firms from the purview.
On Thursday, Nariman argued that the explanation to the section clearly said all matters relating to the prospectus fall within the jurisdiction of the central government only. The entire SEBI order, based on the finding that the prospectus filed by the Sahara companies was illegal and found to have contained mis-statements, cannot be sustained as SEBI did not have any say over these matters, Nariman said.
He also emphasised Section 28 (1b) of the Securities Contracts Regulation Act, which said OFCDs, which had a fixed conversion price could not be listed on the stock exchanges. SEBI and MCA are expected to make their replies on these points tomorrow.
