Cabinetmay reviewFDI rules on Monday
SANJEEB MUKHERJEE
New Delhi, 22 November
The Cabinet is likely to meet on Monday to take up two important
proposals on foreign direct investment ( FDI), in the realty sector
and the pharmaceutical industry.
As multinational companies (MNCs) make a beeline to acquire Indian
pharma firms, the Cabinet will consider aproposal by the commerce and
industry ministry to tighten the FDI policy for the sector.
The proposal would incorporating conditions such as mandatory
investment in research and development (R& D) and a non- compete
clause in the shareholders pact.
The proposal asks that a foreign company not be allowed to close an
existing R& D centre and to mandatorily invest up to 25 per cent of
the FDI in the new unit or an R& D facility. The total investment
would have to be within three years of the acquisition.
For full report, visit www. businessstandard. com
Source Business line
But where are the investors?
The Sahara story is much more than one about a company engaged in
para-banking activity and violating capital market regulations.
More than a year has passed since the Supreme Court ordered two Sahara
Group companies to return to SEBI over Rs 24,000 crore raised through
optionally fully convertible debentures (OFCD). The money, to be
deposited within three months of the court order on August 31, 2012,
was to be refunded to nearly 3 crore investors who had ostensibly
subscribed to the OFCDs. The role of the capital markets regulator was
to refund investors after ascertaining their genuineness. The deadline
is long over and Sahara has coughed up only Rs 5,120 crore so far,
even while claiming that most investors had already been refunded.
This and Sahara's continuing obfuscatory tactics are nothing but an
open defiance of the apex court. But the twists and turns in this
seemingly interminable courtroom saga raises an obvious question — is
this case fundamentally one about investor grievances? Irrespective of
what SEBI claims and what the Supreme Court seems to believe, the
answer is no. There are good reasons to think there were never 3 crore
Sahara investors in the first place. Though SEBI's website carries a
running ticker inviting investors to seek refund, there have been
claims from a very small number of subscribers, for sums running into
a few lakhs. The fact is that the bulk of the investors simply haven't
come forward; they are phantoms, untraceable despite the magnitude of
the scam.
It raises a further question. If these are fictitious investors, who
were a part of an elaborate money-laundering scheme, then, is SEBI —
which is mandated to protect investors — the right organisation to be
fighting this case? Should we be surprised that despite openly seeking
out complainants, SEBI has made precious little headway? Wouldn't it
have been far better if the case was treated as a money-laundering one
and left from the very beginning to the Enforcement Directorate? The
ED, which has recently registered two cases on the issue, will
investigate, among other things, whether the missing money has been
transferred out of the country and whether a large number of the
investors were phantoms — in effect, conduct the kind of probe that
SEBI isn't capable of.
It is time the Sahara case is not treated as principally one in which
a company engaged in shadowy para-banking activity and thereby
violated capital market regulations. The Supreme Court has put
pressure on the group by preventing the sale of any of its properties
and demanding that it submit original title deeds of land worth Rs
20,000 crore to SEBI. But the full truth of the Sahara story — the one
about phantom investors and missing sums of money — is likely to be
uncovered only by cases registered under the Prevention of Money
Laundering Act (PMLA).
(This article was published on November 22, 2013)
Keywords: Supreme Court order, Sahara Group companies, SEBI,
optionally fully convertible debentures, OFCD, fictitious investors,
money-laundering scheme, phantom investors
--
CS A Rengarajan
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