• News
  • Columns
  • Interviews
  • BW Communities
  • Events
  • BW TV
  • Subscribe to Print
  • Editorial Calendar 19-20
BW Businessworld

Court Allows Sahara To Raise Funds For Roy Bail

Photo Credit :

The Supreme Court has cleared the way for embattled conglomerate Sahara to raise $1.05 billion in fresh loans backed by its overseas hotels, helping the group to fund the bail it needs to release its jailed boss.
Sahara Chairman Subrata Roy, one of India's best-known businessmen, has been held in a New Delhi jail for more than 10 months over the group's failure to comply with a court order to refund billions of dollars to investors in outlawed bonds.
The court said Sahara Group could go ahead with its proposed transactions for a loan of around $1,050 million from abroad for raising Rs 10,000 crores to ensure release of Subrata Roy from jail.
However, the apex court put conditions including the approval of the Reserve Bank of India (RBI) for the transfer to India the funds raised in the US to meet the requirement set for release of Roy.
The apex court, which had asked 65-year-old Roy to pay Rs 10,000 crore to get bail, out of which Rs 5,000 crore should be paid in cash and rest in bank guarantee, on Friday extended its August 1 order for conference facility for him in Tihar Jail to deal with the nitty-gritty of transaction till February 20.
A bench headed by Justice T.S. Thakur passed the order after the market regulator Securities and Exchange Board of India (SEBI) and senior advocate Shekhar Naphade, who is assisting the court as an amicus curiae, agreed with the plea of Sahara that "there was no risk for the court in allowing the transaction for the loan".
"In the circumstances and keeping in view the submissions of counsel for SEBI and amicus curiae and other safeguards, there is no reason why we do not allow the prayers," the bench, also comprising Justices A.R. Dave and A.K. Sikri, said while making it clear that permission for transaction of loans would be subject to certain conditions.
The bench said Sahara will move the RBI at appropriate level or before its competent authority and make representation for suitable clarification for bringing the amount arranged in the US and deposit it in the account of Aamby Valley Ltd, Mauritius, a fully owned subsidiary of Sahara India's Aamby Valley Ltd.
Further, the bench said the entire loan amount generated from the US shall be deposited with Aamby Valley Ltd, Mauritius and shall not be utilised or transferred by the Indian subsidiary, for any other purpose except for being deposited with SEBI in the SEBI-Sahara refund account.
Thirdly, the bench made it clear that Sahara will not be free to claim any equity on the amount raised as loan from overseas and deposited with Aamby Valley Ltd, Mauritius, for the purpose of bailing out Roy from jail.
Out of the amount of $1,050 million, Sahara has been allowed to raise a junior loan of $650 million and $400 million in investment from Mirage Capital Llc.
The submission in this regard was made by Sahara's counsels S. Ganesh, Rajiv Dhavan and Keshav Mohan. They had submitted that Sahara be allowed for taking over of the Bank of China loan on foreign Hotels by another creditor.
Sahara failed in its earlier attempt to sell the hotels, and Roy was sent back to jail in early October, after spending almost two months in a makeshift prison office.
Sahara, which has interests in finance, real estate and media among its varied businesses, is a household name in India as the former main sponsor of the Indian cricket team. Roy has been often photographed with senior politicians, cricketers and stars of the Bollywood film industry.
Roy was sent to jail on March 4 last year along with two other directors Ashok Roy Choudhary and Ravi Shankar Dubey.
Transfer Of Money
The court during the last hearing had clarified that legal impediments in the transfer of money from escrow account of foreign bank agent requires special permission by competent authority under the Foreign Exchange Management Act (FEMA).
The issue had cropped up after amicus curiae had submitted that the legal requirement for external commercial borrowing requires clearance under FEMA which has not been complied with by the Sahara Group.
Sahara had said there was no requirement of RBI approval under the FEMA regulations in the concerned transaction.
The court was hearing the issue of Sahara seeking its nod for raising "junior loan" of $650 million (Rs 3,600 crore) as a part of the scheme to overcome the liability with Bank of China which had lent money to it in purchasing stakes in three overseas hotels, Dream Downtown and The Plaza in New York and Grosvenor House in London.
Sahara had also informed the bench that escrow account has been shifted to Bank of America.
Sahara on December 17 last had handed over to the SEBI cheques amounting to Rs 1,900 crores relating to sale of domestic properties.
The apex court on December 2 had permitted Sahara to proceed with the sale of four domestic properties, which is likely to fetch Rs 2,710 crore.
The court had allowed the group to sell properties in Jodhpur, Pune, Chauma in Gurgaon and Vasai in Mumbai after it was satisfied that the transactions were in accordance with its June 4 order.
The bench was told that there are some problems in selling the Pune property, which would likely to fetch Rs 550 crore.
Earlier the court was told that the transactions for these properties would be completed by May 2015 and in the meantime, the purchasers would deposit post-dated cheques in the SEBI-Sahara refund account with undertakings that those would be honoured on due dates.
Out of the list of nine domestic properties, Sahara has already sold its Ahmedabad property and has raised Rs 411.82 crores which has gone into the account of the SEBI.
The SEBI had moved the court seeking its direction to Sahara to give a schedule for the ayment of Rs 47,000 crore to it.

Tags assigned to this article:
supreme court rbi news 6 sebi subrata roy sahara group