SEBI-Sahara: Another Unusual Legal Situation!
There has been a curious turn of events in the SEBI-Sahara battle. SEBI’s resounding victory on August 31st suffered a setback on December 5th. On August 31st a bench of Justice Khehar & Justice Radhakrishnan had given Sahara time up to November 30th to refund its OFCD investors. This week a bench headed by the Chief Justice of India gave Sahara time up to February 2013 to refund the money. The judgment may have only bought Sahara 3 more months but it has raised several eyebrows. Can one Supreme Court bench modify an order passed by another Supreme Court bench? Over the next several minutes we are going to take you back in time to recount what went on since August 31st as also look into the future to see what precedent these events set.
AUGUST 31ST 2012
A Supreme Court bench of Justice Radhakrishnan & Justice Khehar ruled in favour of SEBI and ordered 2 Sahara Group companies to return to its OFCD investors the full outstanding amount of over 20,000 crore rupees, alongwith 15% interest, within 3 months. Sahara was to pay the money to SEBI and the regulator would verify investor identities before refunding the money. Sahara had 10 days to give SEBI all the investor documents.
2 Sahara Companies collected: approx Rs 27000 cr
Outstanding as of 2011: Rs 17400 cr
Interest: 15% per annum
Sahara companies filed a review petition in the Supreme Court
Sahara claims it sent a truckload of documentation to SEBI within the 10 day limit. But SEBI did not accept it as the documents arrived on the 10th day, after office hours.
October 19th 2012
SEBI approached the Supreme Court (Bench: J. Radhakrishnan & J Khehar) alleging Sahara’s non-compliance with the main order. The bench pointed SEBI back to its order – which had empowered the market regulator to attach Sahara’s assets & properties in case of non-compliance.
November 2nd 2012
SEBI filed a contempt petition against Sahara claiming it had not furnished the investor documents within the court stipulated time.
Aug 31st: Main Order – empowers SEBI to attach Sahara assets
Oct 19th: SEBI approaches SC bench alleging non-compliance by Sahara
Nov 2nd: SEBI files contempt petition against Sahara in SC
Turns out, just a day before the contempt petition was filed, SEBI had issued a letter to the 2 Sahara companies asking them to furnish details of all bank accounts and properties. SEBI did not explain to this show why, but I suppose they could be initial moves in case SEBI had to resort to attaching Sahara’s assets & properties.
Nov 1st: SEBI issues letter to Sahara companies asking for details on all bank a/c & properties
26 days after receiving SEBI’s letter and 3 days before their court mandated refund time limit expired; the 2 Sahara companies approached the Securities Appellate Tribunal.
The complaint: That SEBI had deliberately refused to accept the investor documents and that it had wrongly proceeded on the basis that Sahara was in non-compliance of the Supreme Court order. Sahara’s counsel Gopal Subramaniam told the Tribunal his client feared SEBI would neither accept the investor documents, nor the Rs 5120 crore towards outstanding OFCDs and hence cause Sahara to violate the supreme court order.
Nov 27th: Saharas appeal to SAT
Saharas to SAT: SEBI deliberately refused investor documents
SEBI wrongly claims Saharas to be in non-compliance with SC order
Saharas to SAT: Fear SEBI will not accept investor documents or Rs 5120 cr refund
Nov 29th 2012
SAT dismissed Sahara’s appeal saying ‘The cause of action, if any, will arise if the money is tendered by the appellants as per directions of the Supreme Court and the same is not accepted by the Board. The Hon’ble Supreme Court is seized of the matter....We see no reason how this Tribunal gets jurisdiction to entertain the appeal or give any further directions in the matter.”
On Friday November 30th, a day after its SAT appeal was dismissed; Sahara approached the Supreme Court to appeal the SAT order.
On Monday, December 3rd Sahara’s petition was taken up by a 3 judge bench – headed by Chief Justice Altamas Kabir.
That Monday didn’t go well for SEBI. Counsel Arvind Datar told this show that in Monday’s hearing “SEBI submitted before the SC that any change in the payment schedule could be done only by the Bench that passed the order. Further, a review petition by Sahara and a contempt petition by SEBI were also pending before that bench.”
SEBI v/s SAHARA
Dec 3rd: In The Supreme Court
“SEBI submitted before the SC that any change in the payment schedule could be done only by the Bench that passed the order. Further, a review petition by Sahara and a contempt petition by SEBI were also pending before that bench.”
But to no avail. The matter dragged on to Wednesday, when, despite SEBI’s objections, the Chief Justice’s bench granted Sahara its request for a time extension – up to February 2013 to make the full repayment in 3 instalments (Rs 5120 cr now, Rs 10,000 cr by first week of January & the remaining by first week of February).
Sahara has been given a 3 month reprieve. But the manner in which this happened has raised several eyebrows within the legal fraternity. Supreme Court Senior Counsel Prashant Bhushan was in court during the hearing. He was representing an investor who attempted but failed to intervene in the matter. I asked Mr Bhushan for his account of what happened in court.
Prashant Bhushan, Advocate, SC: I saw the Securities and Exchange Board of India (SEBI) counsel raise these objections and he was rudely asked to just sit down and even after the court proceeded to hear the arguments of the counsel for Sahara, the SEBI counsel again got up to make his submissions. He was again rudely asked to sit down. Thereafter the Chief Justice proceeded to dictate the order modifying the earlier order of a coordinate bench of the court passed in August, virtually rendering infractuous the contempt petition filed by SEBI against Sahara and virtually snatching the case from that coordinate bench to itself. When Mr. Datar -representing SEBI- again got up after he had completed dictating the judgement to make his submissions and pointed out that he had not been heard in this matter, he was rudely told by the Chief Justice that as a Senior Counsel he had no business to interfere or say anything once he had already dictated the order. So at no stage were the arguments of SEBI heard and an order was passed virtually modifying a final judgement of another coordinate bench of the Supreme Court (SC). This is absolutely unheard of in the SC. It is not only most improper; it is simply astounding.
Prashant Bhushan: It was not only unusual, but it was highly improper for a coordinate bench of the SC to hear a matter, which seeks a modification of a final judgement passed by a coordinate bench of the SC. Any judgement of the SC, even if it is by a two-judge bench, is a final judgement. It cannot be appealed before a larger three-judge bench or a five-judge bench. It can only be reviewed by the same bench and thereafter you can file a curative petition, which goes before a Constitution bench in which the original judges are also there. That is according to the rules. So, therefore, for any judge to say that we can modify a final judgement of another coordinate bench because we are a three-judge bench is totally incorrect. It is most improper and it makes a mockery of the principle of a decision of the SC being final and not capable of being appealed to a larger bench of the same SC.
Soli Sorabjee, Senior Counsel, SC: Let us be clear- in the contempt petition, which is pending before I think justice Radhakrishnan and Khehar, the issues are different. Contempt is a matter between the court and the litigant. This Special Leave Petition (SLP), which Sahara filed was in respect of Securities Appellate Tribunal (SAT’s) order- this is different cause of action. Now that SLP can be heard by any bench, not necessarily that of Radhakrishnan and Khehar because even though there maybe some overlapping, the question is this is a fresh cause of action arising out of SAT’s order against which Sahara filed an appeal. So, it does happen at times when we tell the court- look a similar matter is before such and such bench. Sometimes the court feels that. This was a cause of action arising after a subsequent order of SAT. Now the bench could have said in that case you go to the same bench. But it is not necessary. The bench did not commit any illegality or it is not unconstitutional. It may be saying this is a fresh matter, we will hear it.
Prashant Bhushan: The SAT clearly said in its order that they have no jurisdiction to deal with this application of Sahara because this is an issue which has been settled by the SC and if they wanted any modification of that order or any interference with that, they have to approach the SC; which meant that they had to approach the SC by way of review or by way of filing an application in the previous matter and therefore even if they chose to file a fresh SLP against this order of SAT, the court must necessarily send it to that same bench, which had heard the matter. To say that this is a fresh matter arising out of a fresh SLP would mean allowing any party in future, which has lost a case finally in the SC to find another way of approaching a different bench by way of filing some frivolous writ petition in the High Court (HC) and then approaching the SC by way of SLP.
Soli Sorabjee: Please approach it clearly. Could this three judge bench have taken up the matter in the first place? Could it have heard the matter? Now if it could have heard the matter, the position doesn’t change depending on the order it passes. Suppose it had dismissed, not given a days extension, then what would have happened? It is not a question whether they will modify it or not they took up the fact of the problem, there is no justification or extension. Here they took a view that it could be extended at certain time. If it was nothing wrong in the bench hearing the matter, it doesn’t become wrong because of the order it passed because otherwise, as I told you, some will say SEBI is forum shopping. SEBI said no, we only want that bench, not any other bench- why don’t you look at it from that point of view, about SEBI forum shopping and not pick up a particular bench, but it is not very clear. As I said it is a grey area and I think it would have been more appropriate or preferable to avoid any controversy for this bench to say- go before the same bench and say what you want to. But if they didn’t, they didn’t commit any impropriety.
Prashant Bhushan: In my view, they can ignore this order passed by the Chief Justice’s bench because it is an order passed completely without jurisdiction, but whether they will do so or not because if they do so it will create an unseemly situation in the Supreme Court. Therefore, whether they will do so or not will depend upon them, but in my view they would certainly be within their rights to ignore this order of the Chief Justice’s bench, which is clearly without jurisdiction.
Soli Sorabjee: Suppose if Sahara doesn’t adhere to the time given by the three judge bench, of course that will be aggravation- the contempt petition will still be pending. If Sahara defaults, surely that will be an aggravated circumstance for the contempt petition; contempt petition hasn’t been rendered infractuous.
Prashant Bushan: I would suggest that they go back to the original bench and press their contempt and if the original bench says that now the Chief Justice’s bench has passed a different, order you go there- then they should seek a review of this Chief Justice’s order and thereafter file a curative petition because as I said it is an order passed completely without jurisdiction.