SAHARA INDIA REAL ESTATE CORP.LTD. Vs SECURITIES & EXCH.BOARD OF INDIA
Bench: T.S. THAKUR,ANIL R. DAVE,A.K. SIKRI
Case number: C.A. No.-009813-009813 / 2011
Diary number: 35629 / 2011
Advocates: GAURAV KEJRIWAL Vs
K J JOHN AND CO
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Page 9
Page 10
Page 11
Page 12
Page 13
Page 14
Page 15
Page 16
Page 17
Page 18
Page 19
Page 20
Page 21
Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
I.A. NOS. 8-9 & 10-12 OF 2014 IN
CONTEMPT PETITION (C) NO.412 OF 2012 IN
CIVIL APPEAL NO. 9813 OF 2011
S.E.B.I. …Appellant
Versus
Sahara India Real Estate Corporation Ltd. & Ors. …Respondents
WITH
I.A. NOS. 8-9 & 10-12 OF 2014
IN CONTEMPT PETITION (C) NO.413 OF 2012
IN CIVIL APPEAL NO. 9833 OF 2011
AND
I.A. NOS. 10-12 OF 2014
IN CONTEMPT PETITION (C) NO.260 OF 2013
IN CIVIL APPEAL NO. 8643 OF 2012
1
Page 2
J U D G M E N T
T.S. Thakur, J.
1. By our order dated 4th June, 2014 we had, while
declining the prayer made by the contemnors for
modification of the terms on which they were granted
interim bail, partially modified order dated 21st November,
2013 passed by this Court and that passed by SEBI on 13th
February, 2013 so as to enable Sahara India Real Estate
Corporation Limited (SIRECL) and Sahara Housing
Investment Corporation Limited (SHICL) (hereinafter
referred to as ‘Saharas’ for short) to deposit with SEBI the
maturity value/sale consideration of FDs, bonds and
securities held by the Saharas. We had also, by the same
order, permitted Saharas to sell nine different properties
situate in nine different cities in the country and to deposit
the sale proceeds thereof with SEBI, to the extent the same
was necessary to make a total deposit of Rs.5,000/- crores
required in terms of the bail order. We had also permitted
Saharas to charge its immovable property situate in Aamby
2
Page 3
Valley (Pune) for obtaining and furnishing to this Court a
bank guarantee for an amount of Rs.5,000/- crores in terms
of the bail order dated 4th June, 2014. As regards Sahara’s
prayer for permission to sell three hotel properties situate
outside the country, we had left the question open to be
determined after Saharas furnished the requisite
documents/information in terms of our order dated 29th May,
2014 evidencing the approval of Bank of China to the
proposed transfer of the stakes held by the Saharas in the
said three properties. We were informed that Bank of China
had a charge over the three properties and that it had
agreed in principle to the sale of the stakes held by Saharas
subject to the repayment of the outstanding loan amount for
which the said properties were charged. We had also noticed
the valuation reports in regard to the three properties
mentioned above and a contention urged by Saharas that
the same had been prepared by reputed valuers at the
instance of the Bank of China in connection with the loan
transactions as a part of the ongoing exercise undertaken by
the bankers. We had asked Saharas to obtain a confirmation
3
Page 4
from the Bank of China to the effect that the valuation
reports prepared in respect of the three offshore hotel
properties by CBRE and JLL have been prepared at the
instance of the Bank of China and that the same had been
accepted by the bank to be correct. We were of the view
that such a confirmation would lend re-assurance to the
Court that the valuation reports represented the true value
of the stakes held by the Saharas in the said three
properties. This is evident from the following portion of the
order passed by us on 29th May, 2014:
“Dr. Dhawan submitted, on instructions, that an ap- propriate communication could subject to the order of this Court be addressed to the Bank of China by the Saharas seeking its approval to the proposed transfer of the stakes held by Saharas in the three properties mentioned above, subject to the repay- ment of the loan outstanding against those proper- ties. Dr. Dhawan submitted that a copy of the com- munication addressed to the Bank of China and its response shall be placed on record before this Court along with an affidavit within one week from today. He further submitted that apart from the correspon- dence that may be exchanged on the subject be- tween Saharas and the Bank of China, the Bank of China will also be requested to confirm the amount that is outstanding towards the loan ad- vanced by it in regard to each one of the three properties mentioned above to give a clear picture to this Courts to the outstanding liability that re- mains to be liquidated by the Saharas qua the said properties.
4
Page 5
Our attention was also drawn to the valuation reports in regard to the three properties mentioned earlier. It was urged that the said valuation reports have been prepared by reputed valuers at the in- stance of the Bank of China in connection with the loan transactions as a part of on-going annual exer- cise undertaken by the lending Bank. If that be so, Saharas would do well to obtain a confirmation from the Bank of China to the effect that the valuation reports prepared in respect of the three properties mentioned above by CBRE and JLL, have been pre- pared at the instance of the Bank of China and that the said valuation reports have been accepted by the Bank to be correct. This could lend re-assurance to the Court that the value/stakes held by Saharas in these properties are sought to be transferred on the basis of the true market value of the said as- sets. Needful shall be done expeditiously, but not later than one week from today.”
2. Saharas have now made the present applications
seeking certain directions. In I.As No. 8-9 of 2014, Shri
Subrata Roy Sahara has prayed for temporary/conditional
release from judicial custody for a period of 15 days or so to
meet his nonagenarian and ailing mother as also for taking
steps for compliance with the order of this Court dated 26th
March, 2014. The applicant has, inter alia, stated that his
mother Smt. Chhabi Roy who is aged over 93 years suffers
from several ailments which complicate matters in view of
her being in a fragile emotional state. The applicant Shri
Subrata Roy Sahara is also, according to the averments, not
5
Page 6
keeping good health requiring medical attention. The
application, however, stops short of elaborating the medical
condition of the applicant Shri Sahara. More importantly, the
application seeks release of Shri Sahara on parole with a
view to negotiating deals directly with the purchasers who
have shown interest in the purchase of the property being
offered for sale by the Saharas.
3. In the accompanying I.As Nos.10, 11 & 12 of 2014
Saharas have prayed for permission to obtain a bank
guarantee of Rs.5,000/- crores by leveraging the three
overseas hotel properties by way of sale, mortgage in the
light of the Bank of China’s consent to such sale or transfer,
and certification that the valuation reports were prepared at
the instance of the Bank and accepted by it. The Saharas
also seek permission for sale, hypothecation,
mortgage/leverage the land owned by them and situate in
Versova.
4. Appearing for the applicants, Dr. Rajiv Dhavan, learned
senior counsel, argued that the applicants had, pursuant to
our order dated 29th May, 2014, addressed a joint letter to
6
Page 7
the Bank of China on 2nd June, 2014 requesting the Bank of
China to confirm the information sought for by this Court.
The Bank of China had, on receipt of the said
communication, consented to the proposed sale of the
stakes held by Saharas in the hotel properties subject to the
repayment of the amount outstanding against Saharas. It
had also confirmed the loan amounts and the valuation
reports as required by the Order passed by this Court. Our
attention was, in support of that submission, drawn by the
learned counsel to letter dated 3rd June, 2014 sent by the
Bank of China to the Saharas conveying the Bank’s consent
to the sale and direct or indirect disposal by the Saharas
Group of its interests in the three hotels subject to the
condition that the sale proceeds are sufficient to and the
same are applied towards repayment in full of the
outstanding principal, interest and other amounts including
any applicable prepayment premia, fees, out of pocket costs
and expenses of Facility Agents and lenders owned by
Sahara Group in connection with the loans obtained from the
Bank. The letter sets out the outstanding amount under the
7
Page 8
Sahara Group loans as on 2nd June, 2014 in the following
words:
“2) Amounts outstanding under the Sahara Group Loans as at 02 June 2014
A. Amounts outstanding under the Sahara Group Loans as at 02 June 2014 are:
As at 02 June 2014
GHH Loan Plaza/Dream Loan
Loan outstanding balance
£289,750,000.0 US$427,241,303.00
Accrued Interest £985,469.20 US$244,036.67
Prepayment Fee £2,897,500.00 $8,544,826.07
Libor Breakage Costs
Approximately £11,873,16, final amount to be confirmed at the prepayment date
Approximately £9,740.96, final amount to be confirmed at the prepayment date
Legal Fees Approximately £15,000 final amount to be confirmed at the prepayment date
Approximately £15,000, final amount to be confirmed at the prepayment date
Please note that the exact amounts required to prepay the Sahara Group Loans will depend on when the prepayment is made. Whilst the above numbers are accurate as at 2 June 2014 (Except that the Libor Breakage Costs and Legal fees are estimates), they are subject to change.”
5. The Bank of China has also, in the same
communication, confirmed that valuation reports were
8
Page 9
instructed and accepted by the Facility Agents for loan
security purposes in regard to the three properties in
question. The bank says :
“Latest Valuation reports prepared pursuant to the Sahara Group loans
The following Valuation reports were instructed and accepted by Facility Agent for loan security purposes:
• Plaza Hotel Valuation Report prepared by CBRE dated 27 Oct 2013 with the Market Value of US$592,000,000;
• Dream Downtown Hotel Valuation Report prepared by CBRE dated 29 Oct 2013 with the Market Value of US$252,000,000
• Grosvenor House Hotel Valuation Report prepared by Jones Lang LaSalle (JLL) dated 26 February 2014 with the Market Value of £516,000, 000
We understand that you will share a copy of this letter with the Supreme Court of India.”
6. It was in the above context, Dr. Dhavan submitted that
(a) Bank of China had no objection to the proposed
sales/transfer of the stakes held by the Saharas in the three
hotel properties and (b) the valuation reports indicating the
value of the assets in question were prepared on the
instructions of the Bank of China and had been accepted by
it for loan security purposes. Dr. Dhavan argued that the
9
Page 10
valuation reports had been prepared in the ordinary course
of business long before the present controversy arose and
were truly indicative of the market value of the properties. It
was also submitted that the reports were prepared by
reputed international valuers after a thorough and analytical
application of recognised methods of valuation of a going
establishment like a hotel. There was, therefore, no basis for
any apprehension that the properties proposed to be sold
may be sold at a price lesser than the true market value
with a view to defrauding the creditors or siphoning away
the sale consideration. Dr. Dhavan argued that while the
encashment of FDs and sale of bonds and securities had
already resulted in the deposit of a substantial amount of
over Rs.3,000/- crores in SEBI-Sahara Refund account, sale
of the three hotel properties would enable the Saharas to
make up the deficit amount of Rs.2000/- crores besides
helping Saharas arrange a bank guarantee for another
Rs.5,000/- crores, as directed by this Court.
7. Mr. Arvind P. Datar, learned Senior Counsel appearing
for SEBI, on the other hand, contended that the prayer
10
Page 11
made by the contemnors/applicants in I.As. No.8 and 9 for
release on parole was not justified on the ground stated.
The material on record did not, according to the learned
counsel, suggest that Shri Subrata Roy Sahara had any
serious medical problem to justify his release on parole nor
can his release on parole be justified on the ground for
facilitating negotiations with the prospective purchasers. It
was submitted that Saharas had not come forward to
disclose the names of the prospective buyers with whom
they proposed to hold such negotiations nor was there any
concrete proposal at present under their consideration.
8. As regards sale of the three hotel properties, Mr. Arvind
P. Datar, did not deny that though the Bank of China has a
substantial charge over the said properties but according to
the valuation reports the market value of the property is
considerably higher than the outstanding loan amount,
thereby accepting the plea of the applicants that if the
properties are sold, sufficient surplus would be available
even after discharge of the Bank loan that could be utilised
for deposit with SEBI and for furnishing a bank guarantee as
11
Page 12
demanded by this Court. Moreover, the valuation reports
prepared by leading and reputed international valuers were
not questioned by Mr. Arvind P. Datar nor was it suggested
that the reports had been procured only for use in these
proceedings.
9. We have considered the matter in the light of the
submissions made at the bar. The contemnors stand
committed to jail by the Order of this Court dated 4th March,
2014 on account of their failure to comply with the directions
of this Court’s Orders dated 31st August, 2012 and 5th
December, 2012 and those issued on 25th February, 2013 in
I.A. No.67 of 2013 in Civil Appeal No.9813 of 2011 and I.A
No.5 in Civil Appeal No.9833 of 2011. Interim bail order
passed by this Court on 26th March, 2014 requires them to
deposit Rs.10,000/- crores, out of which Rs.5,000/- crores
has to be in cash while the balance has to be secured by
bank guarantee of a nationalised bank furnished in favour of
SEBI. It was with a view to enabling the contemnors to
comply with the said direction that this Court had by Order
dated 4th June, 2014 lifted the embargo placed upon
12
Page 13
operation of the bank accounts and sale/transfer of
immovable assets held by the Saharas qua nine properties
referred to in the said order. Saharas have since then
deposited an amount of more than Rs.3,000/- crores with
SEBI by encashment of FDs, Bonds and securities.
10. Saharas have also out of the nine properties referred to
above sold the property situate in Ahmedabad for a sum of
Rs.4,11,82,55,138/- (Rupees Four Hundred and Eleven
Crores Eighty Two Lacs Fifty Five Thousand One Hundred
and Thirty Eight only). The remaining eight properties,
however, remain to be sold or encumbered. We had in the
light of the above asked Dr. Dhavan whether the proposed
sale/transfer of the offshore hotel properties was essential
when no less than eight other properties apart from Aamby
Valley (Pune) remained to be sold or encumbered for raising
funds necessary for compliance with the order of this Court.
Dr. Dhavan argued that it may be easier for the contemnors-
Saharas to leverage the overseas hotel properties for deposit
of the deficit of around Rs.2000/- crores and arranging a
bank guarantee of Rs.5,000/- crores in comparison to sale
13
Page 14
or transfer of property situate within the country which may
take a relatively longer period leading to continued
incarceration of the contemnors in jail. It was submitted
that so long as it was ensured that the offshore properties
are sold for the market value they command, the Saharas
should have the liberty to do so.
11. There is, in our opinion, merit in the contention urged
by Dr. Dhavan. What is important is that the properties held
by the Saharas are sold at their market value and the sale
proceeds, subject to any other directions issued by this
Court, utilised for compliance with the terms of the
conditional bail order issued by this Court. It is evident that
if sale of properties situate within the country is likely to
take time, the contemnors may be exposed to a longer
period of incarceration on account of their failure to comply
with the directions of this Court. On the other hand, quicker
the compliance with the directions of the Court’s Order for
deposit of cash and bank guarantee, the easier would be the
way out of jail for them. The anxiety on the part of the
Saharas generally and the contemnors in particular to sell
14
Page 15
the offshore properties is, therefore, understandable
especially when such sale and transfer is not only going to
help Saharas in liquidating the outstanding loan amount
payable to the Bank of China but leave sufficient surplus
with the Saharas to not only deposit the balance of
Rs.2,000/- crores approximately that needs to be
immediately paid by them but also furnish a bank guarantee
for a sum of Rs.5,000/- crores, as directed. We, therefore,
see no legal impediment in permitting the sale of the
offshore properties owned by Saharas. This is particularly so
when not only do we have the valuation reports of the said
properties on record prepared as they are by internationally
reputed valuers but also the concurrence of SEBI for the sale
of such properties at that value subject to the condition that
the sale consideration shall as far as possible be at the
estimated value of such properties, less, at the most by 5%
of such value. We are, mindful of the fact that Saharas have
sold the property at Ahmedabad at more than three times
the circle rates of such property. No such rates are,
however, available or prescribed for offshore properties. We
15
Page 16
shall, therefore, have to go only by the valuation reports of
the valuers as the basis for such proposed sale/transfer
subject to a margin of 5% which we have indicated above.
In case the offer received is lesser by more than 5%, they
will seek prior approval of the Court.
12. We may incidentally mention at this stage that Dr.
Dhavan had sought a clarification of our Order dated 4th
June, 2014 inasmuch as in the para 23 (iii) (b) of the said
order, we had stated that the sale of the properties referred
to in the order shall not be for an amount lesser than the
circle rate for such properties or the estimated value
indicated by the Saharas whereas in the operative portion of
the said order we had permitted sale at a price that is not
lower than the circle rate prescribed for such properties.
Having regard, however, to the experience that Saharas
have had with the sale of properties in Ahmedabad which
fetched more than three times the circle rates prescribed for
the same, we are of the view that the actual market value of
the property held by Saharas is many times more than the
circle rates for such property. This is evident not only from
16
Page 17
the sale transaction relating to Ahmadabad property but also
the fact that Saharas have themselves estimated the value
of the properties much higher than the circle rates for the
same. In the circumstances, we see no difficulty in
clarifying that the sale of the remainder of the properties
which we have permitted to be sold by our order dated 4th
June, 2014 shall not be lesser than the estimated value of
the properties given by Saharas less by no more than 5% of
such estimated value. In case the offer(s) received is/are
less by more than 5%, prior approval of the Court will have
to be sought.
13. That brings us to the question whether the contemnors
can be granted parole as prayed for in the applications? We
regret to say that we do not, for the present, see any
justification for us to take a view different from the one
taken in our order dated 4th June, 2014. There is nothing
before us to show that Shri Subrata Roy Sahara suffers from
any serious medical condition. At any rate, we expect the jail
doctors to keep a check on his medical condition and provide
necessary medical aid as and when required. The alternative
17
Page 18
ground urged for the grant of parole also does not stand
closer scrutiny. There is, at present, no concrete proposal
with Saharas for sale of the properties situate in India or
abroad that may call for any negotiation by Shri Subrata Roy
Sahara. While it may be true that such negotiations cannot
be said to be advisable when properties of such magnitude
as in the instant case are sought to be sold, yet it is pre-
mature for us to make any arrangement to facilitate any
such negotiations either by directing release of Shri Subrata
Roy Sahara on parole or otherwise. We may make it clear
that if a situation arises in which negotiations become
essential, this Court may consider passing orders to facilitate
such negotiations. Beyond that we do not consider it
necessary or proper to say anything at this stage.
14. In the result :
1. I.As. No.8-9 of 2014 in Contempt Petitions (C)
No.412 and 413 of 2012 are dismissed.
2. I.As. No.10-12 of 2014 in Contempt Petitions (C)
No.412 of 2012, 413 of 2012 and 260 of 2013 are
18
Page 19
allowed to the extent that three offshore hotel
properties owned by Saharas are allowed to be
transferred, sold or encumbered subject to the
condition that the entire sale consideration
received by the Saharas after repayment of the
loan outstanding towards the Bank of China is
deposited with SEBI towards compliance with the
directions contained in the conditional bail order
dated 26.3.2014 passed by this Court. The excess
amount, if any, shall be deposited by the Saharas
in a separate account to await orders from this
Court regarding their utilisation. The sale of the
offshore properties shall not be at a price lesser
than the value estimated by CBRE and JLL for the
said properties reduced at the most by 5% of such
value.
3. We clarify that sale of remainder of the properties
which Saharas have been allowed to transfer, sell
or encumber in terms of our order dated 4th June,
2014 shall not be at a price less than the
19
Page 20
estimated value of the said properties reduced at
the most by 5% of such estimate.
4. We had by our order dated 4th June, 2014
requested Shri F.S. Nariman, Senior Advocate, to
assist the Court as an Amicus Curiae. We had also
permitted Shri Nariman to associate two juniors of
his choice to brief him in the matter. Shri Nariman
as in terms of a communication dated 5th June,
2014 regretted his inability to assist the Court as
he had also appeared for Saharas upto 31st
August, 2012 when the main judgment was
delivered in the case. That Shri Nariman had
appeared on behalf of Saharas had been brought
to our notice also but only after we had
pronounced the order in the Court on 4th June,
2014 by which he was appointed as Amicus
Curiae. It is obvious that having appeared as a
counsel on behalf of Saharas Mr. Nariman cannot
possibly take up the assignment offered to him.
We, therefore, have no option but to modify our
20
Page 21
order dated 4th June, 2014 to the extent that in
place of Shri F.S. Nariman, Senior Advocate, we
request Shri Shekhar Naphade, Senior Advocate,
to assist the Court in the case as an Amicus
Curiae. The terms and conditions of Shri
Naphade’s appointment shall, however, remain the
same as were stipulated for Shri Nariman.
………………….……….…..…J. (T.S. THAKUR)
………………….……….…..…J. (ANIL R. DAVE)
………………….……….…..…J. (A.K. SIKRI)
New Delhi July 22, 2014
21