Sahara India Commercial Corporation Limited & Another vs SEBI

IN THE SECURITIES APPELLATE TRIBUNAL
AT MUMBAI

TH
DATED THIS THE 9 DAY OF MARCH, 2026

CORAM: Justice P.S. Dinesh Kumar, Presiding Officer
Ms. Meera Swarup, Technical Member
Dr. Dheeraj Bhatnagar, Technical Member


Appeal No.250 of 2019
[Along with Misc. Application No.990 of 2022]

1. Sahara India Commercial
Corporation Limited (SICCL)
Sahara India Sadan, 2A Shakespeare
Sarani, Kolkata-700071.

2. Sahara India
Sahara India Bhawan,
1 Kapoorthala Complex,
Aliganj, Lucknow-226024.













…Appellants

(By Mr. J. P. Sen, Senior Advocate with Mr. Kunal Vaishnav, Ms.
Afreen Thanevala, Mr. Gautam Talukdar, Mr. Simranjeet Singh
and Mr. Yajat Gulia, Advocates i/b. Vis Legis Law Practice for the
Appellants.)


The Securities and Exchange Board of India
(SEBI), SEBI Bhawan, Plot No.C-4A,
G Block, Bandra Kurla Complex,
Mumbai.




…Respondent


(By Mr. Chetan Kapadia, Senior Advocate with Mr. Suraj
Chaudhary, Mr. Mihir Mody, Mr. Vijay Chockalingam, Mr. Karthik
K.P. and Mr. Aavish Shetty, Advocates i/b. K. Ashar & Co. for the
Respondent.)

2


With
Appeal No.251 of 2019

1. Shri Subrata Roy Sahara
Sahara India House,
New Hydrabad Colony,
Lucknow-226007.

2. Shri J.B. Roy,
F-170A, Sainik Farm,
New Delhi-110062.

3. Shri O.P. Srivastava
A-706, Sector-C,
Mahanagar, Lucknow-226006.

4. Lt. Gen.(Retd.) A.S. Rao
Aamby Valley City,
Village Ambavane, Tal. Mulsh
District-Pune, Maharashtra-412213.

5. Shri Ranoj Das Gupta
80-32, Sonargaon, Narendrapur
Station Road, Sonapur,
Kolkatta-700150.
































…Appellants

(By Mr. J. P. Sen, Senior Advocate with Mr. Kunal Vaishnav, Ms.
Afreen Thanevala, Mr. Gautam Talukdar, Mr. Simranjeet Singh
and Mr. Yajat Gulia, Advocates i/b. Vis Legis Law Practice for the
Appellants.)


The Securities and Exchange Board of India
(SEBI), SEBI Bhawan, Plot No.C-4A, G Block,
Bandra Kurla Complex,
Mumbai.




…Respondent


(By Mr. Chetan Kapadia, Senior Advocate with Mr. Suraj
Chaudhary, Mr. Mihir Mody, Mr. Vijay Chockalingam, Mr. Karthik

3

K.P. and Mr. Aavish Shetty, Advocates i/b. K. Ashar & Co. for the
Respondent.)

With
Appeal No.252 of 2019

1. Mr. I. Ahmad
B-41, Sector-H,
Aliganj, Luknow-226024.

2. Mr. O.P. Dixit
B-177, Sector-C, Indira Nagar,
Lucknow-226016.

3. Mr. Asad Ahmad
537-KHA, Nayapurva,
Faizullaganj, Sitapur Road,
Lucknow-226020.

4. Mr. A.N. Mukherjee
B-604, Shanti Apartments,
Charkop Village, M.G. Road,
Khandivali (West), Mumbai – 400067.

5. Mr. C.B. Thapa
36, Shiv Vihar Colony,
Sector-5, Vikas Nagar,
Lucknow-226022.
































…Appellants

(By Mr. Kazan Shroff, Advocate with Mr. Vikash Kumar, Advocate
i/b. Lex Legal & Partners for the Appellants.)


The Securities and Exchange Board of India
(SEBI), SEBI Bhawan, Plot No.C-4A, G Block,
Bandra Kurla Complex, Mumbai.




…Respondent


(By Mr. Chetan Kapadia, Senior Advocate with Mr. Suraj
Chaudhary, Mr. Mihir Mody, Mr. Vijay Chockalingam, Mr. Karthik
K.P. and Mr. Aavish Shetty, Advocates i/b. K. Ashar & Co. for the
Respondent.)

4


THESE APPEALS ARE FILED UNDER SECTION 15T OF THE
SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 TO
SET ASIDE ORDER DATED OCTOBER 31, 2018, PASSED BY THE
SEBI.

THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR
ORDERS ON JANUARY 7, 2026 COMING ON FOR
PRONOUNCEMENT OF ORDER THIS DAY, THE TRIBUNAL MADE
THE FOLLOWING:

ORDER

Per: Justice P. S. Dinesh Kumar, Presiding Officer


These set of three appeals are directed against the order
1 2
dated October 31, 2018, passed by the WTM , SEBI issuing
directions to refund the amounts, disclose inventory, to issue
public notice and debarring the appellants under the SEBI Act,
3
1992 („SEBI Act‟ for short).

2. a) Appeal No.250 of 2019 is filed by Sahara India
Commercial Corporation Limited (“SICCL”/“the Company” for
short) and M/s. Sahara India.
b) Appeal No.251 of 2019 is filed by the five directors of
the Company.

1
Whole Time Member
2
Securities and Exchange Board of India
3
Securities and Exchange Board of India Act, 1992

5

c) Appeal No.252 of 2019 is filed by the four managers
and the Company Secretary of the Company.

3. As these appeals arise out of a common impugned order,
they were heard together and disposed of by this common order.

4. Brief facts of the case are:

a) SICCL is a public company incorporated on January 2,

4
1992 and is registered with RoC Kolkata, West Bengal.
Sahara India, the main entity of Sahara Group, is a
partnership firm of Subrata Roy Sahara, Mrs. Swapna Roy,
J. B. Roy and O. P. Srivastava.

b) The Sahara Group entities i.e. Sahara India Real Estate

Corporation Limited (“SIRECL” for short) and Sahara
Housing Investment Corporation Limited (“SHICL” for
5
short) had issued OFCDs from year 2008 and 2009
onwards.

6
c) During the investigation of OFCDs issued by SIRECL and
7
SHICL , SEBI discovered that another Sahara Group
8
company, SICCL, had filed an RHP and final prospectus
with the RoC in West Bengal to raise ₹17,250 Crores
through OFCDs.

d) As per SEBI‟s request, RoC provided copies of the RHP filed
on June 29, 2001 and the prospectus filed on July 5, 2008.

4
Registrar of Companies
5
Optionally Fully Convertible Debenture(s)
6
Sahara India Real Estate Corporation Limited

7
Sahara Housing Investment Corporation Limited
8
Red Herring Prospectus

6

SICCL's balance sheet as on March 31, 2009, showed
₹6,922.32 Crore as outstanding OFCDs.

9
e) The MCA conducted an inspection under Section 209A of
the Companies Act, 1956 („the Act of 1956‟ for short), and
shared a report with SEBI highlighting violation of Sections
63, 68 and 73, along with details of claims for redemption
or conversion of OFCDs for about ₹13,000 Crores and
urged SEBI to take action. On analysis, SEBI found that
SICCL had offered OFCDs from 1998 to 2009, raising at
least ₹14,106 Crores from at least 1,98,39,939 (1.98
Crore) allottees from July 6, 1998 to June 30, 2008. There
appeared prima facie violation of the SEBI Act, 1992,
10
Companies Act, 1956, DIP Guidelines, 2000 , ICDR
11
Regulations, 2009 , and Merchant Banker Regulations,
12
1992 .

13
f) SEBI issued an SCN on February 20, 2015, to SICCL, its
directors, promoter, managers, and arranger (M/s Sahara
India), alleging unlawful offer and raising of ₹14,106 crores
through OFCDs during 1998 to 2009.

g) SEBI‟s main allegation is, offering OFCDs was a public offer

in terms of Section 67 of the Companies Act, 1956 and
consequently, the Company ought to have complied with
Sections 56, 62, 63, 68, 73(1), 73(2) and 73(3) and

9
Ministry of Corporate Affairs
10
SEBI (Disclosure and Investor Protection) Guidelines, 2000
11
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009
12
SEBI (Merchant Bankers) Regulations, 1992
13
Show Cause Notice dated February 20, 2015

7

Sections 117B and 117C of the Companies Act, 1956 and
the relevant provisions of the DIP Guidelines read with
ICDR Regulations. In substance, it was alleged that the
appellants had violated the proviso to Section 67(3) of the
Act of 1956 and therefore, the offer was liable to be
treated as a public offer.

h) Appellants were given an opportunity to inspect the
documents and file reply. They were finally heard on
February 7, 2018 and thereafter, the impugned order has
been passed.


5. We have heard Mr. J. P. Sen, learned Senior Advocate for
the appellants in Appeal Nos.250 and 251 of 2019 and Mr. Kazan
Shroff, learned Advocate for the appellant in Appeal No.252 of
2019 and Mr. Chetan Kapadia, learned Senior Advocate for the
respondent-SEBI.

6. At the outset, Mr. Sen submitted that only 17 Crores
worth of OFCDs out of ₹14,106 Crore ordered to be refunded are
remaining for redemption. SICCL‟s contention with regard to
repayment was summarily rejected. They had urged that (i)
debentures worth ₹4,400 crores were converted into equity; (ii)
a sum of ₹1527.76 Crores was refunded by SICCL through
cheques; and (iii) the balance amount of ₹8157.80 crores was
refunded in cash.

7. With regard to appellant‟s plea that debentures worth
₹4,400 crores were converted into equity, he submitted that
Form-2 dated April 15, 2004 and September 21, 2010 were filed

8

with the RoC, enclosing a compact disc (CD) containing details of
allotment for conversion of OFCDs into equity capital of the
Company amounting to ₹1400 Crores and ₹3000 Crores
respectively. SEBI‟s order records that the list of debenture
holders was not provided, but the appellant was never called
upon to provide the dates.

8. With regard to another sum of ₹1527.76 Crores, he
submitted that it was refunded by cheques and the payment was
made through verified bank channel yet the said plea has also
been rejected.

9. With regard to amount of ₹8157.80 Crores refunded in
cash, he submitted that the appellants had produced a CA
certificate which certified the amount of refund made by the
Company as on October 31, 2017. The said certificate has also
been rejected by the SEBI on the ground that supporting
documents were not produced by the Company, however, the
Company was never called upon to produce the same. Further,
there are affidavits of branch managers of M/s Sahara India
stating that payments were made in cash to the investors have
also not been considered. He submitted that such summary
rejection of the cash payments is untenable.

10. Mr. Sen further submitted that in Sahara India Real Estate
14
Corporation Ltd. v. Securities and Exchange Board of India , the
Apex Court has distinguished the offers made by the SICCL and
held that the proviso to Section 67(3) of the Companies Act,

14
2013 (1) SCC 1

9

1956 would not apply to the issue of OFCDs under consideration.
Relying on paragraph 253 of the said judgment, he submitted
that the findings in paragraph Nos.22, 23 and 25 of impugned
order are contrary to the observations made by the Apex Court.
He submitted that OFCD‟s being issued prior to amendment,
cannot be bought under the purview of the proviso.

11. He further submitted that the impugned order travels
beyond the SCN and bifurcates the period of issuance of OFCDs
which was absent in the SCN. The entire offer has to be
considered as a whole and SEBI could not have bifurcated the
period and hold that the issuance of securities after the
amendment in 2000 did not fall within the ambit of private
placement within Section 67(3) of the Companies Act, 1956. He
contended that since the entire offer had commenced in the year
1998, the issue of the securities cannot attract the proviso to
Section 67(3) of the Companies Act, 1956.

12. He further submitted that the SCN did not call upon the
appellants to produce any evidences of persons to whom OFCDs
were issued. The allegation that there was absence of evidence
of persons to whom OFCDs were issued, is raised for the first
time in the impugned order. This being a factual matrix, an
opportunity ought to have been granted to the appellants to
prove whether the offer was made to targeted persons. The RoC
and MCA have recognized the issue as private placement .

13. Mr. Sen further submitted that to consider the applicability
of Section 67(3) of the Companies Act, 1956, it is necessary to
consider the date on which the offer is made and not the date on

10

which securities are issued or the date on which the allotment is
made. The proviso to Section 67(3) of the Companies Act, 1956
would operate only if the offer was made after the said proviso
was introduced. He submitted that the findings regarding
’domestic Concern’ and that „targeted persons‟ identified by the
Company do not satisfy the test of domestic concern, based on
the parameters prescribed under the English Companies Act,
2006 is incorrect. The reliance placed by the WTM on the
15
judgment of Sahara by the Hon'ble Supreme Court of India is
therefore, misconceived.

14. He further submitted that once an issue is made, it is a
single issue. Also, SEBI has no jurisdiction under Section 55A of
the Companies Act, 1956 as the said provision was inserted by
Companies (Amendment) Act, 2000, while the issue of OFCDs
opened on July 6, 1998 and therefore, the said provision cannot
be made applicable retrospectively. Even otherwise, SEBI‟s
jurisdiction is restricted to the listed companies and not to the
companies intending to list their securities.

15. Mr. Sen further submitted that there is substantial delay
in initiating the proceedings. The issue of OFCDs was opened on
July 6, 1998 and the SCN was issued in February 2015 with a
delay of 17 years. Further, necessary approvals were given by
the competent authority for issuance the OFCDs. After a lapse of
17 years, SEBI could not have initiated any action.


15
Sahara India Real Estate Corporation Ltd. v. Securities and Exchange Board
of India, 2013 (1) SCC 1

11

16. Mr. Sen further submitted that before appointing M/s
Sahara India as an “arranger”, proper applications were filed,
permissions were sought and all formalities were completed by
the Company. The RoC has duly approved the same and no
objection was raised by the RoC at that point in time. The
Merchant Banker Regulations read with the DIP Guidelines are
not applicable to the facts of this case because the issue by
SICCL was a private issue and not a public issue to bring it within
the purview of the Merchant Banker Regulations read with the
DIP Guidelines.

17. Per Contra , Mr. Chetan Kapadia, learned Senior Advocate
for the SEBI submitted that with regard to conversion of
debentures into equity shares, a belated application was made
after the impugned order was passed. Similarly, regarding
conversion of OFCDs of ₹3000 Crores, a CD containing the
information was provided a month prior to passing the impugned
order. He submitted that the SCN clearly calls upon the
appellants to furnish the details of the OFCD holders whose
amount is claimed to have been refunded with the mode of
refund details to be furnished by way of CD/DVD. Hence, there
is no violation of principles of natural justice.

18. He submitted that no repayments through cash is
permissible in law. A single page CA report was filed suggesting
repayments of ₹14,088 Crores and the CA report is only an
opinion and not evidence. The affidavits of the branch managers
and the investors were made to M/s Sahara India and not to
SICCL.

12

19. He submitted that SEBI has inherent jurisdiction ever
since 1992 to take cognizance under the SEBI Act against the
issues related to public offers of the securities and the
Companies (Amendment) Act, 2000 is only clarificatory in
nature.

20. Mr. Kapadia submitted that SEBI has taken cognizance of
16
the matter while investigating the issue of OFCDs in SIRECL &
17 18
SHICL and consequent upon filing of DRHP in 2008-09. He
19
relied on Oriental Bank of Commerce v. DDA and SEBI v.
20
Information Technologies (India) Ltd. and submitted that
Hon‟ble Delhi High Court has held that until the matter came to
the notice of the proper person, who is authorized to file a
complaint, it cannot be said that the knowledge of inspecting
21
officer is the knowledge of DDA in that case. Further, there is
no prescribed period of limitation in the SEBI Act and the action
was initiated within a reasonable time. With regard to the
22
authority in BRD Securities Ltd v. SEBI relied upon by the
appellant Company, he submitted that the same was decided on
the facts of that case and same is inapplicable, in this case.

21. With regard to the contention that offer was a private
placement, Mr. Kapadia submitted that there is no document on
record to show that the offer was made only to the targeted

16
Sahara India Real Estate Corporation Limited
17
Sahara Housing Investment Corporation Limited
18
Draft Red Hearing Prospectus
19
(1984) 55 Comp Cas 81
20
(2017) 200 Comp Cas 217
21
Delhi Development Authority
22
Appeal No.492 of 2021, decided on 05.01.2023 by the Securities
Appellate Tribunal, Mumbai

13

persons. The resolution passed by the SICCL for the private
placement does not specify or indicate the names and particulars
of the proposed investors to whom the allotment was to be made
and further the appellant Company failed to submit any proof of
verification of declaration submitted to Sahara India “arranger”
with regard to 1.98 Crore persons to whom OFCDs were allotted.

22. Mr. Kapadia further submitted that the points urged by
the SICCL have been considered and already answered by the
23
Hon‟ble Supreme Court of India in Sahara . He submitted that
the description of invitees given by the appellant cannot lead to
an inference that the offer made by the appellant Company is a
matter of domestic arrangement between the persons making/
receiving the invitation/ offer and as such, the OFCDs in question
did not satisfy the requirement of Section 67(3)(b) of the Act of
1956. He further submitted that post Companies (Amendment)
Act, 2000, the offer of OFCDs by SICCL was an offer to public
within the meaning of first proviso to Section 67(3) of the Act of
1956 having been made to more than 50 members.

23. With regard to the role of arranger (M/s. Sahara India),
Mr. Kapadia submitted that it is apparent from the agreements
between SICCL and arranger that SICCL intended to issue OFCDs
to the persons dealing with the group companies or associates of
Sahara Group, which can never be a domestic concern and the
terms of the appointment of arranger was modified to facilitate
provision of personalized service to OFCD holders since OFCD

23
Sahara India Real Estate Corporation Ltd. v. Securities and Exchange
Board of India, 2013 (1) SCC 1

14

holder were scattered all over the country. The arranger (M/s.
Sahara India) facilitated the issue which was not a domestic
concern, as a Merchant Banker. He submitted that the
appellants have fragrantly violated the law and prayed that the
appeal may be rejected.

24. We have considered the rival submissions and carefully
perused the records made available to us.

25. In the light of rival contentions, the points which arise for
our consideration are:

i. Whether the OFCDs offered and issued are public
offer with the regulatory jurisdiction of the SEBI?
ii. Whether the alleged delay in initiating the
investigation is bona fide?


26. Undisputed facts of the case are:
i. SICCL and M/s Sahara India are the Sahara Group entities.
ii. SICCL had issued OFCDs to 1,98,39,939 persons and
raised an amount aggregating to the tune of ₹14,106
Crores.
iii. The offer of allotments began in 1998 (July 6, 1998) and
continued till June 30, 2008.
iv. M/s Sahara India was appointed as the sole arranger and
acted as a Merchant Banker to the issue.

15

27. Re: (i) Whether the OFCDs offered and issued are
public offer with the regulatory jurisdiction of the SEBI ?

28. In order to appreciate the law governing the offer of
debentures, we need to note the purport of Section 67 of the
Companies Act, 1956, which reads thus:

“67. CONSTRUCTION OF REFERENCES TO
OFFERING SHARES OR DEBENTURES TO THE
PUBLIC, ETC.

(1) Any reference in this Act or in the articles of a
company to offering shares or debentures to the
public shall, subject to any provision to the contrary
contained in this Act and subject also to the
provisions of sub-sections (3) and (4), be construed
as including a reference to offering them to any
section of the public, whether selected as members or
debenture holders of the company concerned or as
clients of the person issuing the prospectus or in any
other manner.

(2) Any reference in this Act or in the articles of a
company to invitations to the public to subscribe for
shares or debentures shall, subject as aforesaid, be
construed as including a reference to invitations to
subscribe for them extended to any section of the
public, whether selected as members or debenture
holders of the company concerned or as clients of the
person issuing the prospectus or in any other manner.

(3) No offer or invitation shall be treated as made to the
public by virtue of sub-section (1) or sub-section (2),
as the case may be, if the offer or invitation can
properly be regarded, in all the circumstances –

(a) as not being calculated to result, directly or
indirectly, in the shares or debentures becoming
available for subscription or purchase by
persons other than those receiving the offer or
invitation; or

16

(b) otherwise as being a domestic concern of the
persons making and receiving the offer or
invitation:”


We may record that sub-section (1) covers the cases wherein an
“ offer” to public also includes an offer to selected members of
the company concerned or as clients of the person issuing the
prospectus or in any other manner; sub-section (2) covers the
cases where an “ invitation” is made to public in the similar cases
as above; and sub-section (3) which is the subject matter before
us carves out 2 exceptions to sub-section (1) and (2), stating
that (a) it should not result in directly or indirectly an offer or
invitation to the persons other than the ones to „targeted
persons‟; (b) otherwise as being a domestic concern.

29. It is relevant to note that, there was an amendment to
Section 67 of the Companies Act, 1956 by Companies
(Amendment) Act, 2000, whereby a proviso was inserted to sub-
section (3) of Section 67 of the Act of 1956 with effect from
December 13, 2000 which reads thus:

“Provided that nothing contained in this sub-section shall
apply in a case where the offer or invitation to subscribe
for shares or debentures is made to fifty persons or more”

(Emphasis Supplied)

The said proviso sets a limit of fifty person to the exception
contemplated in sub-section (3) of the Section 67 which means
that any offer or invitation made under any circumstances to fifty
or more persons shall be a public offer.

17

30. In the light of the above legal position, we shall examine
the case on hand. For the sake of convenience, the total period
(July 6, 1998 to June 30, 2008) under consideration is divided
into two parts. Firstly, prior to amendment (before December 13,
2000) and secondly, post amendment (after December 13,
2000).

31. Prior to amendment : In the regime prior to amendment of
Companies Act, 1956, Section 73 of the said Act, required every
company intending to offer debentures to the public by issue of a
prospectus to make an application to one or more recognized
stock exchanges for permission. However, under Section 67 an
exception was carved out to this. Under two specific
circumstances, the company intending to offer debentures need
not have applied to the Stock Exchanges. The first contingency
is, where the debentures were available only to those receiving
an invitation. The second contingency is, where the offer is
domestic in nature. The present case does not fall in either
category. Therefore, Section 73 of Companies Act, 1956 applied
in full force. That means, before issuing debentures, company
ought to have approached one or more recognized Stock
Exchanges and sought permission. Admitted and undisputed
position is, the Company did not approach any Stock Exchange
for permission and thus, there was clear violation of said
provision.

32. Post amendment : On December 13, 2000, a proviso was
inserted to Section 67(3) of Companies Act, 1956 and it reads as
follows:

18

“Provided that nothing contained in this sub-section shall
apply in a case where the offer or invitation to subscribe
for shares or debentures is made to fifty persons or more”


33. As noted above, under Section 73 of Companies Act,
1956, every company offering debentures was required to obtain
permission from a Stock Exchange. The exception was
mentioned in Section 67(3) of Companies Act, 1956, under two
contingencies mentioned above. Thus, the effect of the above
proviso is that the two contingencies described in Section 67(3)
(a) and (b) of Companies Act, 1956, shall not be apply, where
the offer or invitation is made to more than fifty persons. This
means, even if the offer is made directly to the subscriber
(targeted person) or even as a domestic concern, the rigor of
Section 73 of Companies Act, 1956 shall apply if the number of
persons to whom the offer exceeded fifty persons. In the case on
hand, the admitted position is, debentures have been issued to
more than 1.98 Crore people in multiple tranches. Therefore, the
Company was required to obtain a permission from a Stock
Exchange before making such an offer. In substance, appellant
has neither obtained permission from Stock Exchange as
required under Section 73 of Companies Act, 1956, nor obtained
certificate of registration under Section 12(1-B) of SEBI Act,
1992. Therefore, in our view, SEBI has ample power and
jurisdiction to regulate appellant Company‟s activities. Therefore,
we are of the clear opinion that appellant Company has violated
Section 73 of Companies Act, 1956 and accordingly, we answer
the first point for consideration in the affirmative .

19

34. Re : (ii) Whether the alleged delay in initiating the
investigation is bona fide ?

Appellants‟ case is, it had offered debentures to the targeted
individuals. For the reasons recorded hereinabove, we have
rejected that contention and held that the Company had violated
Section 73 of the Companies Act, 1956 which required the
Company to obtain permission from a Stock Exchange to issue
Prospectus. Admitted position is, no such permission was taken,
but the Company collected money from more than 1.98 Crore
people.

35. SEBI Act, 1992 was amended by Act No.9 of 1995,
whereby, Section 12(1-B) was inserted with effect from January
25, 1995, which reads as follows:

“(1B) No person shall sponsor or cause to be sponsored
or carry on or caused to be carried on any venture capital
funds or collective investment schemes including mutual
funds, unless he obtains a certificate of registration from
the Board in accordance with the regulations:

Provided that any person sponsoring or causing to be
sponsored, carrying or causing to be carried on any
venture capital funds or collective investment schemes
operating in the securities market immediately before the
commencement of the Securities Laws (Amendment) Act,
1995, for which no certificate of registration was required
prior to such commencement, may continue to operate till
such time regulations are made under clause (d) of sub-
section (2) of section 30.”
[Emphasis supplied]


36. Securities and Exchange Board of India (Collective
Investment Schemes) Regulations, 1999 came in effect from
October 15, 1999.

20


37. In view of Section 12(1-B) of the SEBI Act, 1992, the
appellant was required to obtain a certificate of registration from
the SEBI. Admittedly, the appellant has not obtained the same,
but collected money by calling it as convertible debentures.

38. Insofar as appellants‟ contention with regard to delay is
concerned, we find that SEBI was investigating into the affairs of
other Sahara Group companies in 2009. SIRECL challenged
SEBI‟s jurisdiction and it was concluded by the judgment of the
24
Hon‟ble Supreme Court of India in the matter of Sahara in
August 2012. Thereafter, SEBI received a report from MCA on
August 27, 2013, pointing out certain violations and the SCN was
issued on February 20, 2015. In the light of the fact that this
case involves collection of money from more than 1.98 Crore
people, the time taken by SEBI in initiating proceeding is not
wholly unreasonableness as SEBI was required to look into
several documents running to thousands of pages.
39. Hence, there is no substance in the ground of delay urged
on the behalf of appellant Company. Accordingly, we answer the
second point for consideration in the affirmative .

40. So far as refund of amounts is concerned, we note that
the SCN was issued on February 20, 2015, whereby the
appellants were called upon to produce proof of refund of OFCDs.
We note that the appellants have filed their replies on various
dates i.e. May 21, 2015, December 29, 2016, February 6, 2018,
February 12, 2018, March 10, 2018, and August 7, 2018. But the

24
Sahara India Real Estate Corporation Ltd. v. Securities and Exchange Board
of India, 2013 (1) SCC 1

21

appellant has not placed any record to prove that money was
actually refunded, except a certificate of Chartered Accountant.
It was rightly contended on behalf of the SEBI that a Chartered
Accountant‟s certificate cannot prove that actual payments made
to 1.98 Crore people. Hence, appellants‟ contention that money
has been refunded is also untenable and accordingly rejected.

41. So far as conversion of OFCDs of ₹1400 Crore into equity
is concerned, appellant had filed a belated application to SEBI on
December 11, 2018 i.e. after the impugned order was passed.
Regarding conversion of OFCDs of ₹3000 Crore into equity is
concerned, appellant provided information one month prior to
passing of impugned order. Regarding repayment of ₹1527.76
Crore through cheques are concerned an application was filed on
December 11, 2018 i.e. after passing the impugned order.
Therefore, this contention of appellant is also unsustainable.

42. Further, so far as the allegations against the Directors and
Managers and the Company Secretary are concerned, we find
that the Red Herring Prospectus („RHP‟ for short) was signed on
29th June 2001. However, the final Prospectus is dated July 5,
2008. These documents were signed by Mr. C. B. Thapa,
Company Secretary based on a Power of Attorney given by Mr.
Subrata Roy Sahara, Mr. O.P.Shrivastava, Mr. J.B.Roy,
Lt.Gen.(Retd.), Mr. A.S. Rao, Mr. Y.N.Saxena and Mr. Ranoj Das
Gupta, the Directors of SICCL. Further, the appellants in appeal
No.252 of 2019 were the Managers and the Company Secretary
at the relevant point of time and they were also the signatories
to the RHP and Prospectus. It is noteworthy that the RHP and
Prospectus were issued under the heading „private placement‟.

22

We have already held that the issue was a not a „private
placement‟ but a „Public Issue‟. The Company has collected
₹14,106 crores from 1.98 Crore investors and not repaid the
same. In view of the gravity and ramification of the case, we are
of the view that Directors are liable under Section 62 of the
Companies Act, 1956.

43. So far as, appellant Nos.1 to 4 in appeal No.252 of 2019
are concerned, they were working as the managers and
appellant No.5 as the Company Secretary. They have pleaded
before the WTM that they were not the managers of the
Company, within the meaning of definition of „manager‟ under
Section 2(24) of Companies Act, 1956. This submission was
accepted by the WTM and they have been exonerated from the
charge of „officers in default‟ and it is held that they are not
liable to refund on the basis of Section 73 of the Companies Act,
1956. However, the WTM has held them responsible under
Section 62(1)(d) of the Companies Act, 1956 (Civil liability for
mis-statement in Prospectus) and saddled joint and several
liability along with Directors to pay back the loss suffered by the
subscribers with interest at 15% p.a. It was argued that the
Prospectus was signed by the Directors through their power
agent and that the appellant Nos.1 to 4 are in no way connected
with the affairs of the Company. Since, the Directors have signed
the Prospectus, WTM‟s finding, holding the Company Secretary
and the Managers liable to pay compensation is unsustainable.

44. Admitted position is, Directors had given „Power of
Attorney‟ to the Company Secretary to sign the Prospectus.
Appellant No.5 is admittedly the power agent of the Directors.

23

Therefore, the Directors who are the principals become liable for
act and omissions of their agent. The WTM has held that
Managers are not liable under Section 73 of the Companies Act,
1956. In the facts of this case, in our opinion, appellants Nos.1
to 4 who are paid employees of the Company cannot be held
liable for act and omissions of the Company and its Directors. We
say so because the directors were signatories to the Prospectus
through their Power of Attorney holder. In the result, their appeal
deserves to be allowed.

45. So far as the co-appellant (M/s Sahara India) in Appeal
No. 250 of 2019 is concerned, we note that it is also one of the
Sahara Group entities and partnership firm. It was designated as
an „arranger‟. It was contended by on the behalf of the said co-
appellant that:

 It had obtained permission from RoC and thus, fully
compliant with all legal requirements;
 The issue was a “private issue” and therefore, the
Merchant Banker Regulations and DIP Guidelines were not
applicable; and
 The appellant Company was not required to obtain any
approval by the SEBI.

46. The co-appellant has admitted it had obtained permission
from RoC. Thus, his connection and involvement with the SICCL
is not in dispute. The co-appellant has acted as an arranger akin
to a Merchant Banker. We have held that the appellant Company
has not obtained permission under Section 73 of Companies Act
1956, nor obtained registration Section 12(1-B) of SEBI Act,

24

1992. Further, we have also rejected the co-appellant‟s
contention that it‟s a private issue and held that registration
under Section 12(1-B) of SEBI Act, 1992 was necessary. Thus,
all three grounds urged by the co-appellant are devoid of merit
and liable to be rejected.

47. In the light of above discussion, the following:

ORDER
1. Appeal Nos.250 and 251 of 2019 are dismissed .
2. Appeal No.252 of 2019 is allowed . Order passed by the
WTM dated October 31, 2018 is set aside qua the
appellants.
3. Pending interlocutory application(s), if any, stand disposed
of.
4. No costs.


Justice P.S. Dinesh Kumar
Presiding Officer






Ms. Meera Swarup
Technical Member



Dr. Dheeraj Bhatnagar
Technical Member


09.03.2026
RHN
RAJALA
KSHMI
H NAIR
Digitally signed
by
RAJALAKSHMI H
NAIR
Date: 2026.03.09
15:06:46 +05'30'