In a significant hearing, the Supreme Court of India expressed reservations about allowing the Enforcement Directorate (ED) to attach properties of the Sahara Group under the Prevention of Money Laundering Act (PMLA). The Court highlighted that such an action could lead to a scenario where investors, who have been waiting for refunds for over a decade, receive nothing. The bench underscored the need for the ED to carefully consider its moves, especially in cases where the Supreme Court is already monitoring the recovery process.
Background of the Sahara-SEBI Dispute
The dispute dates back to 2012, when the Supreme Court directed Sahara companies to refund approximately ₹25,000 crores to over two crore small investors. These investors had purchased debentures from Sahara between 2008 and 2011. Despite this directive, a substantial portion of the amount remains unpaid, leading to contempt petitions against Sahara. The company’s failure to comply with the Court’s orders has been a long-standing issue, with the Court now insisting on a concrete plan from Sahara to deposit the outstanding sum.
Court's Critique of Sahara's Defense
During the hearing, Sahara’s defense, represented by Senior Advocate Kapil Sibal, argued that the company was willing to fulfill its obligations but needed a fair valuation of its properties. However, the Court, particularly Justice Bela M. Trivedi, was skeptical, noting that Sahara had made similar promises a decade ago without any significant follow-through. Justice Sanjiv Khanna further emphasized that as a judgment debtor, Sahara's properties could be attached and sold without waiting for ideal conditions or valuations, indicating the Court’s impatience with the prolonged delay.
Concerns Over the Impact of ED's Attachment
A critical aspect of the hearing was the discussion surrounding the ED's application to attach Sahara's properties. Justice Khanna pointed out that if the ED were allowed to proceed with the attachment, it could result in the investors receiving nothing. The Court stressed that the ED should be discerning in its actions, especially when the Supreme Court is already taking steps to ensure the recovery of funds for the investors. This stance reflects the Court's focus on safeguarding the interests of the investors above all.
SEBI's Allegations and Sahara's Response
The Securities and Exchange Board of India (SEBI) has accused Sahara of engaging in fictitious and benami transactions to circumvent the refund process. This claim has been strongly contested by Sahara’s legal team, which has sought to discredit SEBI’s allegations. The Court did not make any immediate rulings on these contentions but indicated that Sahara could apply for a release of funds from the SEBI-Sahara account, subject to judicial scrutiny.
Conclusion: A Delicate Balancing Act
The Supreme Court’s handling of the Sahara case reflects a delicate balancing act between enforcing legal obligations and protecting the interests of investors. The Court’s reluctance to allow the ED’s attachment of properties underlines its commitment to ensuring that investors are not left empty-handed. As the case progresses, the focus remains on compelling Sahara to comply with the Court's orders while carefully managing the complex legal and financial implications involved. The next steps in this long-running saga will be closely watched, with the potential to set important precedents in the enforcement of financial regulations and investor protection in India.
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