A Sahara group company, which has raised Rs 4,843 crore (Rs 48.43 billion) by issuing optionally fully convertible debentures, is not using its own bank account to handle this money.
In March, the Registrar of Companies, Uttar Pradesh and Uttarakhand, based in Kanpur, sent a notice to Sahara India Real Estate Corp for using a third party's bank accounts to receive funds from investors.
This followed a complaint by an investor.
The OFCDs issued are known as housing bonds.
The debentures were issued by Sahara India Real Estate Corporation Ltd and Sahara Housing Investment Corporation.
The cheques were received in the name of 'Sahara India'.
According to the complainant, the investors put money in Nirman Bonds and real estate bonds.
As instructed by the agents, they issued cheques in favour of 'M/s Sahara India'.
When they got the receipts, they realised these had been issued in the name of a third party.
"The cheque was taken in the name of Sahara India. However, the receipts have been issued by a third company. Is this action approved by the Registrar of Companies?," the investor asked in his complaint.
Business Standard sent several mails and reminders to the company over the last couple of weeks. However, it responded late tonight, seeking another 48 hours to reply.
However, in a written response dated April 19, 2011, Sahara India Real Estate Corp told the registrar that 'Sahara India Real Estate Corporation, through an agreement with M/s Sahara India, has agreed to utilise infrastructure, including bank accounts and other services, of the firm for private placement of optionally fully convertible debentures.'
The company said this did not attract action under Section 297 of Companies Act, 1956,
However, neither the application forms nor the receipts mention this agreement, keeping investors in the dark.
According to legal experts, this is prima facie a wrong practice and may lead to misuse of funds by the third party, impacting the interests of investors.
"Technically, it is wrong. How can I use somebody else's bank account?" said Kanu Doshi, a senior chartered accountant and dean of Welingkar Institute of Management, adding he did not want to comment further as the matter was sub judice.
The case is scheduled to come up on Thursday.
The Supreme Court has asked Sahara to submit a list of agents and the formats of application forms it has been using to raise money through debentures.
According to Sahara India Real Estate's submission, the company has 6.6 million investors. Sebi guidelines clearly specify that any issue of equity or debt to more than 49 people is governed by the Issue of Capital and Disclosure Requirements norms.
Sebi mandates safeguards like appointment of dedicated bankers to handle public issues.
Also, subscription funds are to be held in an escrow account during the period of allotment of shares before being transferred to the company's account.
Sebi has issued an order banning Sahara from raising money through OFCDs for violating public issue norms.
