The Securities and Exchange Board of India (Sebi) has moved the Supreme Court against part of a Securities Appellate Tribunal (SAT) order that gave relief to four managers and the company secretary of Sahara India Commercial Corporation Ltd (SICCL).
A vacation Bench of Chief Justice Surya Kant and Justice V Mohana is scheduled to hear Sebi’s plea on June 18.
The regulator has challenged only the portion of the SAT ruling that held the five employees could not be made liable for the company’s actions. The wider order, which upheld Sebi’s action against SICCL and its directors in the optionally fully convertible debentures (OFCDs) case, remains the central backdrop to the appeal.
Why Sebi moved the court
On March 9, a three-member SAT Bench upheld regulatory action by Sebi against SICCL and dismissed appeals filed by the company and its directors in connection with the alleged illegal issuance of OFCDs.
The tribunal ruled that the OFCDs issued by SICCL between 1998 and 2008 constituted a public offer, bringing them within Sebi’s regulatory jurisdiction.
SAT said SICCL mobilised around ₹14,106 crore from nearly 19.8 million investors through these debentures during the period. It held that such large-scale mobilisation of funds from such a large number of investors could not be treated as a private placement, as claimed by the company.
The tribunal had also rejected Sahara’s contention that most of the funds had already been repaid to investors.
What SAT said on employees
While dismissing the appeals filed by SICCL and its directors, the tribunal allowed a separate appeal filed by four managers and the company secretary.
SAT held that, as employees, they could not be held liable for the company’s actions. It also noted that the prospectus had been signed by the company secretary pursuant to powers of attorney granted by the directors, who remained responsible as principals for the acts of their agent.
That finding is now under challenge before the Supreme Court.
The case pertains to an October 2018 order passed by Sebi directing the company to refund the money raised through the debentures, disclose details of its inventory, and barring certain officials from accessing the securities market.
The Supreme Court’s decision will determine whether the employee-level relief granted by SAT can survive in a case where the tribunal has otherwise accepted Sebi’s view that the OFCD mobilisation was a public offer under securities law.
With inputs from agencies
