Supreme Court Orders Release of ₹5000 Crores for Sahara Depositors: Pinak Pani Mohanty vs. Union of India (29 March 2023)

Date of the Judgment: 29 March 2023
Citation: 2023 INSC 3202
Judges: M.R. Shah, J. and C.T. Ravikumar, J.
Can thousands of small depositors get back their hard-earned money stuck in a long-standing financial dispute? The Supreme Court of India addressed this pressing issue by ordering the release of ₹5000 Crores from the Sahara-SEBI Refund Account to repay the legitimate dues of depositors of Sahara Group cooperative societies. This order aims to provide relief to numerous individuals who have been waiting to recover their investments. The judgment was delivered by a bench comprising Justice M.R. Shah and Justice C.T. Ravikumar.

Case Background

The case revolves around a significant amount of money, approximately ₹24,979.67 Crores, deposited in the “Sahara-SEBI Refund Account”. This account was created following earlier directions from the Supreme Court. A substantial portion of this amount, ₹15,569.27 Crores, was deposited by Sahara India Real Estate Corporation Limited and Sahara Housing Investment Corporation Limited. Notably, ₹2253 Crores of this amount originated from Sahara Credit Cooperative Society Ltd. and was deposited with SEBI due to a dispute involving Sahara Real Estate Limited. The Union of India, through the Ministry of Cooperation, filed an application seeking the release of ₹5000 Crores from this unutilized fund to be disbursed to the legitimate depositors of Sahara Group of Cooperative Societies. The Union of India contended that the deposited amount includes funds belonging to these depositors and that disbursing a portion would be in the larger interest of these depositors.

Timeline

Course of Proceedings

The Union of India, through the Ministry of Cooperation, filed I.A. No. 56308 of 2023, seeking directions to transfer ₹5000 Crores from the “Sahara-SEBI Refund Account” to the Central Registrar of Cooperative Societies. The Solicitor General of India, Shri Tushar Mehta, argued that the funds in the account included money belonging to the depositors of Sahara Group Cooperative Societies, and that disbursing a portion would be equitable and in the public interest. He also stated that there were no other charges or attachments on the funds. The application was filed after a series of meetings with various authorities and departments. The Solicitor General also requested that the disbursement be supervised by a former judge of the Supreme Court to ensure transparency and proper identification of genuine depositors.

Legal Framework

The judgment does not explicitly mention specific sections of any statute or specific articles of the Constitution. However, the core legal principle underlying the decision is the equitable distribution of funds to legitimate claimants, particularly the depositors of the Sahara Group of Cooperative Societies. The Supreme Court’s inherent power to pass orders in the interest of justice and to protect the rights of depositors was the basis of the order.

Arguments

The main argument presented by the Union of India, through the Solicitor General, was that a substantial amount of ₹24,979.67 Crores was lying unutilized in the “Sahara-SEBI Refund Account”. This amount included ₹2253 Crores that had been taken out of Sahara Credit Cooperative Society Ltd. and deposited with SEBI. The Union of India contended that the funds in this account rightfully belonged to the depositors of the Sahara Group of Cooperative Societies. The Union of India argued that transferring ₹5000 Crores from this account to the Central Registrar of Cooperative Societies for disbursement to the legitimate depositors would be just, proper, and equitable. The Union of India also emphasized that there were no other charges or attachments on the funds, and that the disbursement should be conducted transparently, with proper identification of genuine depositors and under the supervision of a former judge of the Supreme Court.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a numbered format. However, the core issue before the Court was whether to allow the transfer of ₹5000 Crores from the “Sahara-SEBI Refund Account” to the Central Registrar of Cooperative Societies for disbursement to the legitimate depositors of the Sahara Group of Cooperative Societies. The Court also considered the modalities for such disbursement, including the need for transparency, proper identification of depositors, and supervision by a former judge.

Treatment of the Issue by the Court

Authorities

The judgment does not explicitly cite any specific cases or legal provisions. The decision is based on the Court’s inherent powers and the principle of equitable relief, considering the plight of the depositors and the availability of funds.

Judgment

The Court’s decision was based on the fact that a substantial amount of money was lying unutilized in the “Sahara-SEBI Refund Account,” which included funds belonging to the depositors of the Sahara Group of Cooperative Societies. The Court noted that “Rs. 2253 Crores had been taken out of the Sahara Credit Cooperative Society Ltd., i.e., one of the four Sahara Group Multi-State Cooperative Societies and deposited with SEBI in the ‘Sahara-SEBI Refund Account’.” The Court also observed that “the amount lying in the ‘Sahara-SEBI Refund Account’ is lying unutilized and the genuine depositors of the Sahara Group of Cooperative Societies, which otherwise, shall be entitled to get back their money.” The Court found the prayer for disbursement to be reasonable and in the larger public interest. The Court directed the transfer of ₹5000 Crores to the Central Registrar of Cooperative Societies, who would then disburse the amount to the genuine depositors in a transparent manner with proper identification and proof of their deposits. The Court also appointed Justice R. Subhash Reddy, Former Judge of this Court, to supervise the disbursement, assisted by Shri Gaurav Agarwal, learned Advocate, as Amicus Curiae. The Court directed that the entire process should be completed within nine months. The Court stated, “We direct that the amount be paid to the respective genuine depositors of the Sahara Group of Cooperative Societies out of the aforesaid amount of Rs. 5,000 Crores at the earliest, but not later than nine months from today.”

What weighed in the mind of the Court?

The Court was primarily concerned with the plight of the genuine depositors of the Sahara Group of Cooperative Societies, who were entitled to get back their money. The fact that a substantial amount of ₹24,979.67 Crores was lying unutilized in the “Sahara-SEBI Refund Account,” which included ₹2253 Crores that belonged to these depositors, weighed heavily in the Court’s decision. The Court also emphasized the need for a transparent and efficient disbursement process to ensure that the funds reached the rightful claimants. The absence of any other charges or attachments on the funds further solidified the Court’s decision to release a portion of the amount for disbursement. The Court’s sentiment was clearly in favor of ensuring that the depositors receive their dues in a timely manner.

Key Takeaways

• ✓ ₹5000 Crores will be transferred from the “Sahara-SEBI Refund Account” to the Central Registrar of Cooperative Societies.
• ✓ The Central Registrar will disburse the funds to the legitimate depositors of the Sahara Group of Cooperative Societies.
• ✓ Disbursement will be transparent, with proper identification and verification of claims.
• ✓ Justice R. Subhash Reddy, Former Judge of the Supreme Court, will supervise the disbursement.
• ✓ The entire process should be completed within nine months.
• ✓ Depositors must submit proof of their deposits and claims to receive their dues directly into their bank accounts.

Directions

The Supreme Court issued the following directions:

(i) ₹5000 Crores to be transferred from the “Sahara-SEBI Refund Account” to the Central Registrar of Cooperative Societies.

(ii) The Central Registrar to disburse the amount to the legitimate depositors of the Sahara Group of Cooperative Societies in a transparent manner, with proper identification and proof of deposits.

(iii) Justice R. Subhash Reddy, Former Judge of the Supreme Court, to supervise and monitor the disbursement, assisted by Shri Gaurav Agarwal, learned Advocate, as Amicus Curiae.

(iv) The disbursement process to be completed within nine months.

(v) The balance amount after disbursement to be transferred back to the “Sahara-SEBI Refund Account”.

Development of Law

This judgment reinforces the principle that the courts will intervene to protect the interests of depositors, particularly in cases where funds are lying unutilized and there are clear claimants. While the judgment does not establish a new legal principle, it demonstrates the Supreme Court’s commitment to ensuring that justice is served and that depositors receive their dues in a timely and transparent manner. The ratio decidendi of the case is that when funds are lying unutilized, and there are legitimate claimants, the Court will exercise its inherent powers to direct the disbursement of those funds, especially when it is in the larger public interest. This judgment also highlights the importance of transparency and supervision in such cases.

Conclusion

The Supreme Court’s order to release ₹5000 Crores from the “Sahara-SEBI Refund Account” marks a significant step towards providing relief to the depositors of the Sahara Group of Cooperative Societies. By directing the transfer of funds and ensuring a transparent disbursement process under the supervision of a former judge, the Court has demonstrated its commitment to protecting the interests of the depositors and ensuring that they receive their legitimate dues in a timely manner. This judgment underscores the importance of judicial intervention in cases involving large-scale financial disputes and the need for a fair and equitable resolution.