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Sahara gets relief from court

LUCKNOW: The Lucknow Bench of Allahabad High Court on Thursday stayed Wednesday’s restraint order of the Reserve Bank of India through which it had prohibited Sahara India Financial Corporation Limited (SIFCL) accepting deposits from its existing depositors or new depositors “whether by way of renewal or otherwise”.

The Court order was issued by a Vacation Bench of Justice U. K. Dhaon and Justice Shabiul Hasnain. The Court said it had no option except to stay the impugned order because innocent investors who were not before the Bench would suffer a lot on account of the RBI order.

In its order of Wednesday, apart from prohibiting the company from accepting deposits, the RBI had directed SIFCL, a residuary non-banking company, to “repay the deposits as and when they mature”.

It further said that the company “shall not treat non-payment of instalments under any running daily deposit or other recurring deposit schemes by depositors after the date of this order as a default by depositor and SIFCL shall be liable to pay the agreed rate of interest on the amounts actually held by it for the entire term of the deposit as if there was no default”.

The RBI directed the company that all securities held in its custody be lodged with the designated bank for custody. The order was passed after submissions made by the company on a show-cause notice issued to it were carefully examined by the RBI. The apex bank noted that SIFCL had continuously violated directions/ guidelines related inter alia to Residuary Non-Banking Company (RB) Directions, 1987, and other norms.

The RBI order, under Sections 45K and 45MB (1) of the RBI Act, 1934, said the same had been passed to “protect the interests of depositors and in public interest”.

A day after the restraint order, the UP Government on Thursday issued directives to the district police chiefs for strengthening security at the divisional and branch offices of the company.

State Home Secretary Mahesh Gupta said the police officers had been asked to ensure that a law and order problem was not created in the likelihood of a reaction by the investors.

Mr. Gupta said the Government had received a letter from the Deputy General Manager of RBI, Lucknow, on Wednesday apprehending a law and order problem.

A request was made to provide security at the RBI establishments in UP, he added.

On the receipt of the above letter, State Chief Secretary Atul Kumar Gupta had fired a missive to G. Gopal Krishnan, Executive Director, RBI, Mumbai, pointing out that the Government should have been taken into confidence sufficiently in advance (before issuing the restrain order) to prepare for proper law and order arrangements, and not presented with a fait accompli.

The Chief Secretary said SIFCL has a very large depositors’ base and a large network of branches in UP, and if the depositors panic it was certain to create a law and order situation.

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