Force India promoter troubles - Sahara asked to pay back Rs. 24,400 crores (4.39 billion dollars and interest) to depositors
Force India F1 team is having trouble with its majority
promoters.
First the flamboyant Vijay Mallya who was the majority owner
of Force India got into trouble when his Kingfisher Airlines went into massive
losses. Last year before the Indian Grand Prix, Sahara group bought into the
team with 45% stakes. It was expected that though at some point of time Vijay
Mallya can pull out, due to the financial stability of the Sahara group the
Force India team is safe.
That hope has now evaporated with the recent orders of the
Hon’ble Supreme Court of India. Two Sahara group companies - Sahara India Real
Estate Corporation Ltd (SIRECL) and Sahara Housing investment Corporation Ltd.
(SHICL) has been ordered by the Hon’ble Supreme Court of India to refund Rs.
24,400 crores (4.39 Billion USD) collected from 2.21 crore (22.1 million) depositors
at 15% interest.
These two Sahara group companies had collected this money
through OFCD debentures. In November 2010 The Securities and Exchange Board of
India (SEBI) had restrained these two companies from raising funds in the form
of optional fully convertible debentures and the litigation was going on first
in the Allahabad High Court and then in the Supreme Court.
A Supreme Court bench of Justices K. S. Radhakrishnan and J.
S. Khehar have ordered that the amounts collected through Red Herring
Prospecturrs (RHPs) dated 13th of March, 2008 (amounting to Rs.
17,400 crores or 3.13 billion USD) and 16th October, 2009 (around
Rs. 7000 crores or 1.26 billion USD) along with 15% interest should be handed
over to SEBI by depositing in a nationalized bank bearing the maximum rate of
interest.
While delivering the judgement, the judges were not sparing
in their words of condemnation. In a separate judgement, Justice Khehar said
“It seems the two companies collected money from investors without any sense of
responsibility to maintain records pertaining to funds received. It is not easy
to overlook that the financial transactions under reference are not akin to
transactions of a street hawker or a cigarette retain made from a wooden cabin.
The present controversy involves contributions which approximate Rs. 40,000
crore, allegedly collected from the poor rural inhabitants of India. Despite
restraint, one is compelled to record that the whole affair seems to be
doubtful, dubious and questionable. Money transactions are not expected to be
casual, certainly not in the manner expressed by the two companies.”
Will Majority promoter Sahara pull out of Force India?
It is not clear how soon this will pull down the Sahara
group and affect the Force India team. With such a massive blow, it is to be
seen how the Force India team copes up. The Sahara Group is yet to issue a
statement on this and the fate of the Force India team. The last word on this is yet to be heard.
