SC bars asset sale by Sahara, grounds Roy
BS REPORTER
New Delhi, 21 November
The Supreme Court on Thursday came down heavily on the Sahara group
after discovering it had not complied satisfactorily with the court's
October order to file title deeds of properties worth ₹ 20,000 crore
with the Securities and Exchange Board of India ( Sebi). The court
imposed restrictions on the entire group, as well as its promoter —no
immovable or movable property can be sold and Subrata Roy has been
barred from leaving the country.
The court passed the order in a contempt case filed by Sebi against
two group companies, Sahara India Real Estate and Sahara Housing
Invest, which allegedly did not comply with the apex court's August
2012 order to refund ₹ 24,029 crore raised from investors through
optionally fully- convertible debentures ( OFCD). Sahara, which paid ₹
5,120 crore to Sebi, claims it has refunded the rest directly to
investors.
The court adjourned the contempt proceedings to December 11.
Last month, the apex court had directed the group to file original
title deeds of properties worth ₹ 20,000 crore to cover its dues. It
emerged there were several flaws in the documents filed by the group.
"They have not complied with the order. They also know it. Everybody
knows it," Judge K S Radhakrishnan said after hearing Sahara counsel
CA Sundaram's explanation and Sebi's counter arguments.
When Sundaram pleaded with the court to clarify on the part of the
order that had not been complied with, Radhakrishnan said: " This
property is not worth ₹ 19,000 crore." Judge JS Khehar told Sundaram:
" It is not for you to understand. It is for Sahara to understand."
Earlier, the Sahara counsel had presented a detailed explanation of
Knight Frank's valuation report of the 106- acre property in Versova,
Mumbai. He presented an additional clarificatory report from the
valuer to explain the methodology of the valuation. He also presented
an additional report by a second valuer.
Both entities had put the valuation of the property between ₹ 18,800
crore and ₹ 19,300 crore under internationally- accepted valuation
methods, such as market- approach method and income method.
Besides these, Sundaram presented an additional clarificatory report
from Knight Frank, addressing certain objections raised by Sebi on
Wednesday. He said the property was located close to the upmarket
Andheri- Lokhandwala complex in Mumbai and was less than a kilometre
from Versova's proposed Metro terminus.
Turn to Page 19 >
Group's attempt to pass off green- zone land as ₹ 19k- cr property
displeases court
Sahara group chief Subrata Roy DECODING THE SAHARA EMPIRE
"This property is not worth ~ 19,000 crore... It is not for you to
understand. It is for Sahara to understand"
JS KHEHAR
Supreme Court judge (To Sahara counsel CA Sundaram)
"They have not complied with the order. They also know it.
Everybody knows it" KS RADHAKRISHNAN Supreme Court judge
(On Sahara's property deeds) COURT RAP
It spanned sectors and sprawled the globe, but Sahara's taproot was
the money- raising machine that thrived by its ties to cricket, cinema
and politics.
Business Standard peeks into the
big tree and the birds in it 9 >
SC bars asset sale by Sahara, grounds Roy
The property was also said to enjoy a premium for its seaview —it is
located between a river and the sea.
He said, quoting the valuers, aresidential complex developed by Oberoi
opposite the said plot was selling flats for ₹ 36,000 a square foot.
Windsor, another developer in the vicinity, was selling at ₹ 30,000-
35,000 a square foot.
The valuers assumed an average rate between ₹ 27,000 and ₹ 37,000 a
square foot. This translated into a value of ₹ 181190 crore an acre, a
figure used to arrive at the entire plot's valuation.
But, all these arguments came a cropper when Arvind Datar, counsel for
Sebi pointed out that the property was situated in the middle of a "
nodevelopment zone" and that there was a clear direction from the
Union environment & forests ministry that barred any development. " It
is in the green zone. Nothing can be built on it. The FSI ( floor
space index) allowed is 0.5; that is why there was a plan to develop
agolf course." Datar also pointed out that the land was part of a
larger disputed area of 614 acres and Sahara had been engaged in legal
disputes with the original owners, B Jeejeebhoy Wakaria and
associates, since 2001.
Datar added the court direction was to file " title deeds" and not
reports of investment value. He said, in view of the facts, this
property could not be considered worth more than ₹ 118 crore.
Sundaram cited Maharashtra government notification of December 2012
that allowed development of townships alongside transport corridor
that would allow Sahara to develop the township. But, neither Sebi nor
the court was convinced.
>FROM PAGE 1
Plans on to reduce banks' reliance on G- secs gradually
BS REPORTER
Mumbai, 21 November
The Reserve Bank of India (RBI) is planning to reduce banks'
requirement of investing in government securities (G- secs), in a
calibrated manner.
"One of the mandates for the Reserve Bank in the RBI Act is ensuring
the flow of credit to productive sectors of the economy. In this
context, it is necessary to reduce banks' requirements of investing in
G- secs in a calibrated way to what is strictly needed, from a
prudential perspective. It is recognised the scope for such reduction
will increase as government finances improve. Further, as the
penetration of other financial institutions such as pension funds and
insurance companies increases, it will be possible to reduce the need
for commercial banks to invest in G- Secs," RBI said in its Trend and
Progress of Banking in India 2012- 13 report.
Currently, the statutory liquidity ratio ( SLR), the portion of
deposits banks have to have as G- Secs, is 24.5 per cent.
Experts feel the move to reduce banks' requirement of investing in G-
secs gradually is to ensure the government's borrowing programme isn't
affected. " The only way to do this is to do it in a calibrated
manner, over a period of time. The government's borrowing programme
will be disrupted if it is done abruptly. The combined ratio of cash
reserve ratio ( CRR) and SLR has to be reduced to a reasonable level.
It has to be brought down to prudential limits, according to Basel-
III requirements," said Mohan Shenoi, president ( group treasury and
global markets), Kotak Mahindra Bank.
Currently, CRR stands at four per cent of banks' net demand and time liability .
A few experts say further reduction of the requirement to invest in G-
secs is more likely when the limit for foreign institutional investors
(FIIs) for investing in these securities is enhanced. " To be Basel-
III compliant, RBI would want to reduce the SLR portion. The process
will be very gradual. Once the gates are opened for FIIs to investment
more, the reliance on banks may probably be reduced for government
borrowing," said S Srinivasaraghavan, head of treasury at Dhanlaxmi
Bank. Currently, the cap on investments by foreign entities in G- secs
stands at $30 billion.
On- site Off- site Total
Public sector banks 40,241 29,411 69,652 Nationalised banks* 20,658
14,701 35,359 SBI group 18,708 13,883 32,591 Private sector banks
15,236 27,865 43,101 Old private sector banks 4,054 3,512 7,566 New
private sector banks 11,182 24,353 35,535 Foreign banks 283 978 1,261
All banks 55,760 58,254 114,014
*Excluding IDBI Bank Source: RBI ATMs OF SCHEDULED COMMERCIAL BANKS
(As of March- end 2013)
FINANCE 7 >
>RBI report points to rise in NPA issues over FY13 >Cobrapost fallout: RBI mulls code for third- party products
Cobrapost fallout: RBI mulls code for third- party products
BS REPORTER
Kolkata, 21 November
The Reserve Bank of India ( RBI) plans to extend the ambit of its
policy on ' Treating Customers Fairly' ( TCF) beyond banking products
to third- party ones such as insurance and mutual funds. The central
bank is expected to soon release some guidelines on this topic.
The move comes on allegations that several public and private sector
banks were guilty of practices that encouraged money laundering and
violated knowyour- customer ( KYC) norms and anti- money laundering
(AML) rules in the sale of gold and other third- party products.
"The intent and basic structure for TCF is in place in India for
banking products of scheduled banks. However, it is now being
considered to extend the TCF structure to third- party products, viz,
mutual funds, capital market and insurance products sold by banks and
also extending the BOS ( banking ombudsman scheme) to non- scheduled
banks," RBI said.
TCF is a consumer protection policy, designed to address the problem
of asymmetric information in the financial services sector. It is a
regulatory initiative in which companies are required to consider
their treatment of customers at all stages of the product lifecycle,
including the design, marketing, advice, point- ofsale and after- sale
stages. RBI says it has taken a lead in ensuring banks' customers in
India are treated fairly. " Over the years, it has initiated several
customer- centric measures and inculcated a culture of treating
customers fairly through regulatory and supervisory interventions,"
the report said.
However, in March this year an online media portal, Cobrapost, alleged
the country's top three private banks were encouraging money
laundering and violating KYC and AML rules. It then conducted a few
more of such ' sting' operations; the videotapes showed other public
and private sector banks having similar practices.
After these allegations, RBI scrutinised the internal control
processes of 39 banks between March and May. The regulator issued
showcause notices to 36 of these, on finding lapses in their
processes. After considering the lenders' responses, RBI decided to
impose a monetary penalty on 31 banks.
Subsequently, the central bank also issued guidelines on wealth
management services, marketing and distribution of third- party
financial products, KYC norms and AML standards.
"Based on the thematic reviews and the follow- up action taken, the
Reserve Bank has provided alist of actionable issues to banks. It has
been felt that inspections and scrutinies have to be more targeted and
the focus should be on the results, rather than the mere processes,"
RBI said. The regulator had also issued a guidance note for the
inspecting officers on the areas that should be concentrated on while
assessing the adherence to KYC and AML guidelines.
--
CS A Rengarajan
9381011200
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