In a significant regulatory development for India’s securities market, the Securities Appellate Tribunal (SAT) has upheld a Securities and Exchange Board of India (SEBI) order directing Sahara India Commercial Corporation Ltd (SICCL) and its directors to refund approximately Rs 14,106 crore raised through optionally fully convertible debentures (OFCDs) from nearly 1.98 crore investors.

The tribunal dismissed appeals filed by SICCL, Sahara India and several company directors against SEBI’s October 31, 2018 order. The ruling effectively affirms SEBI’s long-standing position that the fundraising exercise undertaken by the Sahara entity constituted a public issue and therefore fell squarely within the regulator’s jurisdiction. The decision also reiterates that companies raising capital from a broad base of investors must comply with disclosure and listing norms mandated under securities law.

According to the tribunal’s findings, the OFCDs were issued between July 1998 and June 2008 to more than 1.98 crore investors across India. SAT observed that under the provisions of the Companies Act, 1956 applicable at the time, any offer made to 50 or more persons is treated as a public offer. Such issues are required to comply with listing obligations and regulatory oversight, including approvals from stock exchanges and adherence to SEBI disclosure requirements.

Since the company neither sought listing approval nor followed the regulatory process associated with public securities issuance, SAT held that SEBI had the authority to intervene and direct refund of the funds raised. The tribunal also upheld the regulator’s view that the OFCD issuance violated Section 73 of the Companies Act, which mandates that companies issuing securities to the public must obtain listing permissions.

Further details of the order and case background can be accessed through official regulatory updates available on SEBI’s regulatory platform and tribunal proceedings documentation.

A key argument advanced by Sahara during the appeals process was that the OFCD issuance was structured as a private placement rather than a public issue. The company contended that the funds were raised through internal networks and domestic arrangements rather than through a public solicitation. However, SAT rejected this argument, noting that the sheer scale of the investor base nearly two crore individuals clearly exceeded the statutory threshold for private placements.

Sahara’s legal team also argued that most of the funds raised had already been repaid or adjusted. According to the company, only around Rs 17 crore worth of OFCDs remained outstanding. The firm claimed that Rs 4,400 crore worth of debentures had been converted into equity shares and that repayments amounting to Rs 1,527.76 crore were made via cheques, while approximately Rs 8,157.80 crore was refunded in cash.

However, SEBI contested these claims, stating that the company failed to provide credible evidence demonstrating actual repayment to investors. The regulator noted that Sahara relied largely on a single-page Chartered Accountant certificate and affidavits from branch managers, which were insufficient to establish that payments were made to millions of investors.

The regulator further argued that large-scale cash repayments would not be legally permissible under securities regulations and questioned the reliability of the documentation provided by the company. SAT accepted SEBI’s position, observing that reliable records identifying investors and confirming repayments were not produced.

Another major argument raised by Sahara was related to regulatory jurisdiction and delay. The company argued that SEBI initiated enforcement action nearly 17 years after the OFCD issuance began and claimed that the issue had originally been recognized as a private placement by authorities such as the Registrar of Companies.

SAT rejected the delay argument, noting that SEBI began proceedings after examining related matters involving other Sahara group entities and reviewing inspection reports from the Ministry of Corporate Affairs. Given the scale of the case involving nearly two crore investors and extensive documentation the tribunal held that the time taken by SEBI to initiate proceedings was not unreasonable.

While dismissing appeals filed by SICCL and its directors, SAT provided relief to certain managers and the company secretary associated with the case. The tribunal ruled that they were salaried employees and could not be treated as officers in default responsible for the company’s regulatory violations.activities. The case has long been viewed as one of the most significant enforcement actions involving mass retail investors in the country.