Mumbai, Oct. 27: Market regulator Sebi is seeking to appoint private investigators to track down the investors who parked their money in two Sahara group companies ' Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) ' that were ordered by the Supreme Court on August 31 to refund Rs 17,400 crore (roughly $3.3 billion) they raised through optionally fully convertible debentures (OFCD) in violation of listing regulations.
The regulator put an advertisement in newspapers today inviting proposals from private investigators who will play a key role in ferreting out details about the investors that the Sahara group has been reluctant to divulge.
The $3.3-billion refund is arguably the largest anywhere in the world arising from a set of botched public issues. The market regulator itself has never handled such a massive gouge-out from any company till date.
The Sahara group companies have been ordered to repay by November 30 the amount collected along with interest at the rate of 15 per cent per year. Sebi was instructed by the court to determine the actual investor base of the two companies and oversee the refund process.
The court had permitted the regulator to attach the properties and freeze the bank accounts of the two companies if they fail to comply with its order.
The court had also appointed retired apex court judge B.N. Agarwal to oversee the steps adopted by Sebi and its officials.
The order had also said that if Sebi was "unable to find the whereabouts of all or any of the subscribers, then the amount collected from such subscribers will be appropriated by the Government of India".
The court had also permitted Sebi to engage the services of investigating officers, and experts in finance and accounts to complete the process.
In their order, Justices K. S. Radhakrishna and Jagdish Singh Kehar said there appeared to be a pre-planned attempt by the two Sahara group companies to escape the regulatory and administrative authority of Sebi. The judge said this led one to believe that "there may be no real subscribers for the OFCDs issued by SIRECL or SHICL. Or alternatively, there may be an inter-mix of real and fictitious subscribers".
SIRECL had apparently collected Rs 17,656.53 crore from 2.21 crore investors in April 2008. SHICL had raised Rs 6,373.20 crore from 11.78 lakh investors in November 2009.
The Sahara group had consistently maintained that the two companies were unlisted and, therefore, did not come within the purview of Sebi. It argued that they were only subject to the superintendence of the ministry of corporate affairs (MCA).
In February 2011, the MCA directed SIRECL to furnish details of the investors, including their names and addresses. In a reply to this notice, the Sahara group company had claimed that it had sent a password-protected compact disk containing the investors' names and the amounts invested in the OFCDs along with two separate sheets containing the procedure and the password to Sebi.
As it turned out, the regulator could not open this file because the password didn't work.
Two months later, SIRECL claimed to have sent a separate CD along with the password to Sebi. It added that because of the enormous amount of work and time taken in collating the data, it was able to provide only "partial information relating to names, numbers and amounts invested by the investors".
In May 2011, Sebi raised serious doubts about the genuineness of the data provided. It claimed that the names and addresses were incomplete and ambiguous.
In its defence, the Sahara group has claimed that many of the investors were from the rural hinterland where people often use just one name and do not have easily identifiable addresses because cadastral surveys are rarely carried out in these areas. People invest on the basis of trust in the individual who collects the money on behalf of the company.