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Sahara India Real Estate Corporation Limited & Ors. v. SEBI of India (2013) 1 SCC 1


  • Whether SEBI has the power to adjudicate and investigate the given matter according to Section 11, 11A, 11B of the SEBI Act and under Section 55A of the Companies Act. Or whether the jurisdiction under Section 55A (c) of the Companies Act is with the Ministry of Corporate Affairs (MCA).
  • Whether the hybrid OFCDs come under the definition of “Securities” within the meaning of the SEBI Act, Companies Act, and The Securities Contracts (Regulation) Act (SCRA) for vesting SEBI with the jurisdiction to adjudicate and investigate.
  • Whether the issue of the OFCDs to millions of persons who had subscribed to that issue is a Private Placement so that not to come within the scope of SEBI Regulations and various other provisions of the Companies Act.
  • Whether listing of the provisions under Section 73 compulsorily applies to all the public issues or it only depends on the “intention of the company” for getting listed.
    Whether the Public Unlisted Companies (Preferential Allotment Rules) 2003 will be applied in this case or not.
    Whether OFCDs are Convertible Bonds and whether they are exempted from the application of SCRA as per the provisions of Section 28(1)(b).


  • The Supreme Court has relied upon Sections 28 (1)(b), 55, 67(3), and 73 of the Companies Act, Section 2(h) of SCRA.


  • This landmark Judgment is undoubtedly a milestone in India’s corporate landscape. From 25th April, 2008 to 13th April, 2011, Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) floated an issue of Optionally Fully Convertible Debentures (OFCDs) and started collecting subscriptions from investors.
  • The company had over Rs. 17,656 crores during that period. In the guise of “Private Placement”, the amount was collected from about 30 million investors. This act was performed without complying with the requisites relevant to the public offerings of the securities. The Whole Time Member of SEBI was taking cognizance of the act.
  • On June 23rd, 2011 they passed an order. The order directed two companies to refund the money to the investors which were collected from them. Additionally, the promoters of the two companies along with Mr. Subrata Roy were restrained from accessing the securities market until further orders. An appeal was made before the Securities Appellate Tribunal (SAT) by the Sahara. This appeal was against the order of the Whole Time Member.
  • After hearing, on 18th Oct 2011, the SAT confirmed and maintained the order of the Whole Time Member. Subsequently, an appeal was made by Sahara before the Supreme Court of India against the order of the SAT.


  • Issue 1: Supreme Court held that SEBI has the power to adjudicate and investigate. Also, the SC said that according to the SEBI Act, the SEBI has special powers for doing investigations and adjudication to protect the interests of the investors. The SC observed that according to provisions mentioned under Section 55A of the Companies Act, so far matters connected to the issue and transfer of the securities and non-payment of the dividend, the SEBI has the power to administer in the case of listed public companies and also in the case of those public companies which intended of getting their securities listed on a recognized and identified stock exchange in India.
  • Issue 2: The Supreme Court held that even though the OFCDs had issued that, it does not cease to be a “Security” within the meaning of the SEBI Act, Companies Act, and SCRA. It says despite having the definition of “Securities” under section 2(h) of SCRA, it doesn’t contain the term “hybrid instruments”. The definition which is provided in the Act is covering all the “Marketable securities”.
  • Issue 3: The Supreme Court held that even though the intention of the companies was of making the issue of OFCDs look like a private placement when such securities are given to more than 50 persons, it ceases to be so.
  • Issue 4: the SC refused this and held that Sec 73 (1) is a compulsory provision of law that companies should comply with and if any issue of securities exceeds 49 persons according to Sec 67(3) of the Companies Act, the intention of companies to get listed does not matter at all. The court also held that, if securities to fifty or more are offered, it is a public offering as per Section 67(3) of the Companies Act.
  • Issue 5: the SC disagreed and observed that 2003 Rules apply only in the context of preferential allotment of unlisted companies, however, if the preferential allotment is a public issue, then 2003 Rules would not apply.
  • Issue 6: The Supreme Court held that 28(1)(b), accurately points out that only the convertible bonds and shares or warrants of the type referred here are excluded from the applicability of SCRA and not debentures which are another category of securities in definition which is present in Section 2(h) of SCRA.