Regulator empowers itself with Supreme Court help
The manner in which the Securities and Exchange Board of India (Sebi) has pursued the Sahara affair, despite not always having had the legal wherewithal to do so, is a textbook case of how a regulator can empower itself when the need arises. Ever since it spotted the irregularities in the issue of the Optionally Fully Convertible Debentures by Sahara India Real Estate Corp and Sahara Housing Investment Corp—this was during the tenure of the previous chairman CB Bhave—the capital markets regulator has worked diligently on the case, taking the help of the Supreme Court where necessary. For its part, the Supreme Court has been extremely supportive and understandably so since it would want to ensure that depositors get their money back; in August last year it directed that the Sahara group companies should refund the money—around R25,000 crore, along with 15% interest to all depositors within three months.
Having come this far, it’s not surprising that Sebi would want to take the recovery process to its logical conclusion; last Friday, it moved the Supreme Court seeking the detention of the group’s promoter Subrata Roy, also asking that three of the group’s directors be barred from leaving the country. These may seem like pressure tactics but the regulator is justified in asking for the arrest since it’s not as though the group has been a model of propriety; while claiming to have repaid the major part of the depositors’ money, it hasn’t yet provided Sebi with the required evidence of having done so nor the names of the investors. Even before this, the retired Supreme Court judge BN Agrawal, appointed by the Court to oversee the compliance of its order of August 31, 2012, is understood to have cited several instances of the group not having complied with the regulator’s directives. As if it hasn’t been audacious enough, the group has, through an advertisement, challenged the regulator to a television debate and complained that the Sebi chief hasn’t given it an audience. Such histrionics should be ignored. Meanwhile, Sebi needs to be further empowered so that it has the right to recover funds, much like the CCI or the Income Tax authorties. Moreover, if it is to provide conclusive evidence in courts and win cases of insider trading it needs to be at least given access to telephone records even if the government is not keen on giving it powers to tap phones.