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 4

th

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 21

st

November,

2013 passed by this Court and that passed by SEBI on 13

th

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 4

th

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 29

th

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 29

th

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 26

th

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 29

th

May, 2014, addressed a joint letter to

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Page 7 the Bank of China on 2

nd

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 3

rd

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 2

nd

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 4

th

March,

2014 on account of their failure to comply with the directions

of this Court’s Orders dated 31

st

August, 2012 and 5

th

December, 2012 and those issued on 25

th

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 26

th

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 4

th

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

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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

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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

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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 4

th

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

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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 4

th

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 4

th

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 4

th

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 4

th

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 5

th

June,

2014 regretted his inability to assist the Court as

he had also appeared for Saharas upto 31

st

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 4

th

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 4

th

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