Another bench? Sahara is back to its old game of endless appeals and forum shopping

On Thursday (27 March), the Sahara Group indicated that it wanted a new Supreme Court bench to hear its case even though it manifestly failed to comply with the court's order of August 2012. This is entirely in keeping with the group's past, present and, possibly, future strategy: if one forum does not give it the result it wants, it will try appealing against it. If that doesn't work, it will appeal to an entirely different forum. And so on.

So if this Supreme Court bench, with Justices KS Radhakrishnan and JS Khehar, is not favourably disposed towards it, it will seek another by alleging all kinds of bias in the existing one.

Consider the Sahara Group's history of forum-shopping over the last few years. The group's primary orientation is to keep raising money - for some activity or the other. And so if one money regulator says no, it shifts jurisdiction to a less regulated area.

In 2008, the Reserve Bank of India (RBI) ordered Sahara India Financial Corporation (SIFC) to stop accepting deposits and wind up its non-bank financial operations. The group saw the writing on the wall and thus withdrew from the RBI's jurisdiction altogether. It not only by terminated SIFC, but also "voluntarily" wound up another non-bank company, Sahara India Investment Corporation Ltd.

The next time it chose what it thought was a safer option: the registrar of companies (RoC) in Lucknow, close to its area of political influence in Uttar Pradesh.

Even as the RBI-regulated area was being vacated, the Sahara group used two undercapitalised companies - Sahara India Real Estate Corporation and the Sahara Housing Investment Corporation - to raise upto Rs 20,000 crore each through the issue of optionally fully convertible debentures (OFCDs) through public placements wrongly labelled as "private placement." The idea obviously was to evade the market regulator, Sebi, by seeking permission from the regional RoC itself.

It almost got away with the ruse, but this is where it tripped. Its ambitions took it to another money raising venture called Sahara Prime City, for which it wanted to make a public equity offer (IPO). It was while vetting this IPO proposal that Sebi stumbled on the Sahara Group's huge OFCD issues. Sahara fought tooth and nail in several fora - from the Allahabad High Court to the Supreme Court. It was only when the options were exhausted that Sebi got to rein the group in.

But the Sahara Group obviously knew that there were higher powers than Sebi, and so found itself appealing against the Sebi order to return the OFCD money with the Securities Appellate Tribunal (SAT). It failed. At SAT, in fact, Sahara's whole game of using the RoC to evade Sebi was exposed, and SAT rapped RoC for "dereliction of duty". It more or less accused RoC of sleeping on the job, and pointed out that any company wanting to raise Rs 20,000 crore with a capital base of Rs 10 lakh should have been sent to Sebi for vetting.

So it went back to the Supreme Court, where Sahara failed again. This is what resulted in the 31 August 2012 order of the Supreme Court upholding Sebi's initial order of June 2011 to disgorge the OFCD money.

One would have thought the buck stops with the Supreme Court, but with the Saharas no forum is the last one.

They then appealed to another bench of the Supreme Court, this time one headed by the former Chief Justice of India, Altamas Kabir, to review the order, but failed again. The bench did, however, give it more time to repay, till February 2013, but it still did not comply.

That's when Sebi started moving contempt petitions against the Sahara Group and its chief, Subrata Roy.

The Supreme Court, this time involving the same bench that ordered it to return the money, gave it patient hearings, but with increasing levels of irritation. The group clearly has not been honest in its efforts to comply with the order of the court.

The last straw came in February this year, when the court demanded a clear plan for repayment, and ordered Subrata Roy to be present in court on 26 February. He failed to turn up, claiming he was attending to his old and sick mother. The Supreme Court's patience snapped, and it ordered his arrest. He has been in jail since then.

Roy has offered a deferred payment plan to escape from the court's tentacles, but the court rejected it. He remains in jail.

This is why the group is back to its game of shifting the forum. It wants a new bench. One hopes the court will see through the game and tell him off.

Updated Date: Mar 28, 2014 14:05:16 IST