Lot of misconceptions came up in the minds of people being unaware about the nitty-gritty of the case owing to subsequent judicial custody of the Sahara Chief however the facts remain that judicial custody has more to do with compliance of the Order but overall case leading to the Supreme Court order for refund of Rs 17,400 Crore was more of an interpretation issue of certain provisions of the Companies Act , 1956 read with SEBI Act and not exactly a case relating to any defrauding investors etc and such interpretation issue can happen to any Company. Sahara Case got more media attention because of the flamboyance and persona of Sahara Chief.

It is infact a Sad travesty that consequence of some legal interpretations done by legal experts of his company has to be suffered by him but Needless to say Civil prison of course could have been avoided if Supreme Court summons would have duly responded with appearance and seeking time frame for compliance in the same manner presently the time frame or proposals are being made for his release under Interim bail.

Let us provide you a brief of the Legal Case against Sahara by SEBI :

• Sahara group companies offered subscription to Optionally Fully Convertible Debentures(OFCD) between April 2008 and April 2011 over Rs 17,566 crores, from about three crore investors.
• As per Law for inviting investors to subscribe to the OFCDs an information memorandum was circulated after it was filed with Registrar of Companies and Information memorandum described the issue as "Private Placement" rather than as "Public offer". A Public offer requires compliance with requirement of public issue of securities
• Before going further, it is important to understand the fine difference between a Private Placement and when a Public offer condition triggers as it remains the bone of contention
• Under the Law if an offer is intended to be made to public at large or if circulation of offer is not confined to limited group less than 50 persons, then such offer will be treated as public offer , otherwise it is a private placement
• The Case against Sahara was that the offer was intended to public at large irrespective of the fact that subscription to offer made by Less than 50 persons.
• This was a clear interpretation issue where based on various corroborating circumstances it was proved that irrespective of subscription by less than 50 persons, the offer was intended to be for public at large
• Now since it is interpreted as public issue, then compliance of public issue procedure under SEBI Act read with SEBI Regulations gets triggered while Sahara group companies have done compliance with private placement procedures.
• Non- compliance with the public issue procedures, lead to OFCD issue not valid under Law and hence proceeds collected were liable to be refunded.
• There were also various contentious legal issues in the matter including the jurisdictional conflict between SEBI and Ministry of Corporate affairs including interpretation as to what constitutes "offer" or "allotment" and whether restriction is for "offer" or also to "allotment".
• One of the Irony of the Case is that in our Country the Laws are so ambiguous and prone to multiple interpretations that sometime even well intentioned provisions under law are subject to misinterpretations equally by Corporates and Legal practitioners as the spirit of the law is not adequately captured while the drafting of the provisions in the legal code governing the law. Similarly there are cases where Corporates and Legal practioners take advantage of an ambiguous provisions in their favour.
• However in nutshell what we intend to emphasize is that Sahara might have done an interpretation error on their part while interpretation the issue of OFCD as private placement but there is no fund diversion/evasion/suppression/concealment or otherwise a fraud which has been proved against them. Since Ignorance or misinterpretation of law is no excuse therefore they were asked to refund the proceeds collected without following the requirements under SEBI regulations for a public issue.
• Another Perception is with regard to long incarceration of Sahara Chief on this matter. Here also there is lot of misconceptions. Sahara Chief could not present himself before Supreme Court when SEBI approached the Supreme Court for non- compliance of its Orders. In case Sahara Chief would have appeared and offered a time frame to comply with the Order of refund, then there could have been a possibility of a different scenario in this case as far as incarceration is concerned. Non- appearance of summons became a contempt issue and Supreme Court being a Court of Record can directly take notice of its own contempt.
• Again the imprisonment of Sahara Chief is a civil prison to enforce payment of an outstanding due and further already an interim bail has been granted by Supreme Court subject to deposit of Rs 5000 Crores as security considering the fact that his judicial custody is only to enforce compliance of the Order.
• Further Apex court has also time to time considered the proposal for release under parole in accordance with Prison Act provided firm proposal with regard to need for release due to business negotiations for sale of properties or due to health or family reasons etc but again since it is a Civil imprisonment owing to contempt of Court and Sahara chief is in judicial custody of Supreme Court, the parole release application, which in normal case goes to the concerned Jail authorities but in this case is heard by the Supreme Court
• Our objective under this column is to provide the common law some legal perspective of the issues which sometimes get blurred owing to constant media interpretations of the state of affairs