Supreme Court of India
The Supreme Court of India declined to entertain a plea seeking directions to the Maharashtra government to completely cut off water supply to liquor units in the state. In Picture: A television journalist sets his camera inside the premises of the Supreme Court in New Delhi February 18, 2014 (Representational image).Reuters file

The Supreme Court on Tuesday directed the Reserve Bank of India (RBI) to initiate action against a Sahara Group company that liquidated securities worth Rs 500 crore to help a partner firm repay investors. This is in clear violation of an earlier order passed by the apex bodies to move all funds generated to the SEBI-Sahara account.

RBI had moved the Supreme Court after a statutory auditor's report indicated that Sahara India Financial Corp Ltd (SIFCL) had sold bonds and securities held by it and extended a loan of Rs. 484.67 crore to Sahara India.

A June 2014 order of the Supreme Court had directed all funds gathered by way of sale of assets or securities by Sahara Group, to be held exclusively in the SEBI-Sahara account, set up to repay depositors.

The RBI's order on 17 June 2008, had directed SIFCL to not use any funds raised for a purpose other than to repay its own depositors and was also quoted in the RBI application submitted with the apex court.

"We never allowed you to encash the securities and to pay the amount to the depositors. Rather, you should have deposited them into the SEBI-Sahara account," the Bench said.

The Bench directed the RBI to initiate necessary action against SIFCL and made the apex banking body a party to the proceedings. The Bench also asked to be provided with an update on action taken, said LiveMint.

Fund Diversion

The diversion found a special mention in the auditor's report, with Sahara's senior counsel S Ganesh contesting the auditor's findings. Sahara said that the funds had been utilised to repay investors. The auditors' report says only Rs.3.03 crore and Rs.3.18 crore had been paid back to depositors.

The Bench headed by T S Thakur took serious umbrage to the events, asking "how could you sell the identified securities? How can you touch these securities?...You should have come to us seeking permission to pay to the depositors.

"We had vacated the order to enable you to deposit the money in the SEBI-Sahara account. You should have come clean on that."

The Bench, also comprising justices A R Dave and A K Sikri, asked the counsel for Sahara to file an additional affidavit explaining the disbursement of funds as claimed. Details pertaining to the recipient identity and the mode of payment – cash or cheque -- are also to be divulged to the court, by way of submission of compact disks to the court, SEBI, RBI, amicus curie senior advocate Shekar Naphande, reported The New Indian Express.

The Bench asked RBI to hear Sahara Group's explanations and to pass the necessary order as required.

Bail Fund Raising Status?

The Bench declined to allow Sahara for an extension of communication facilities for its incarcerated chief Subrata Roy.

Roy and his senior colleagues were arrested on 4 March, 2014 over violations of the Supreme Court order to remit the funds necessary to repay depositors in a bond scheme later deemed illegal.

The Group has pursued various avenues to raise the Rs 10,000 crore bail amount, with three such transactions falling through in the past few months. Every time, Sahara had ventured to validate the buyers' credentials to help fund the transaction, which has come under scrutiny with buyers either backing out or some paying a part sum and feigning inability to repay the rest.

Even as Sahara has found it difficult to raise the Rs 10,000 crore required towards securing bail, its Amby Valley hill town facility, valued at Rs 38,000 crore is yet to be considered for sale to raise the necessary funds.

"You are placing your business above personal liberty. Why don't you sell and earn your liberty", Justice Thakur said, reported Business Standard.