1. Sahara India Financial Corporation Limited (“Noticee/Company/SIFCL”) is a company incorporated under the provisions of the Companies Act, 1956 (“Companies Act”), on August 7, 1987. The Noticee is registered as a sub-broker of National Stock Exchange of India Limited (“NSE”) and BSE (formerly known as Bombay Stock Exchange), having SEBI Registration nos. INS238266238 (NSE) and INS018655139 (BSE), respectively, and is affiliated to IDBI Capital Market Services Limited. The aforementioned registrations are in force since October 30, 2009 for NSE and January 13, 2010 for BSE.

2. Securities and Exchange Board of India (“SEBI”) initiated enquiry proceedings against the Noticee in terms of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 (“Intermediaries Regulations”). SEBI vide an Order dated August 8, 2018 under Section 19 of the SEBI Act, 1992 (“SEBI Act”) read with Regulation 24(1) of the Intermediaries Regulations appointed a Designated Authority (“DA”) to enquire into the violations under Regulation 7(2)(e) read with Schedule II and Regulation 23(a) of the Intermediaries Regulations as alleged against the Noticee, as per the provisions of the aforesaid Regulations and to submit the report with recommendations accordingly.

ENQUIRY BY THE DESIGNATED AUTHORITY:

3. A Show Cause Notice dated September 5, 2018 (“Enquiry SCN”), was issued to the Noticee under Regulation 25(1) of the Intermediaries Regulations. The Noticee was called upon to show cause as to why appropriate recommendations for the alleged violations should not be made against it, by the DA, in terms of Regulation 27 of the Intermediaries Regulations. The Noticee was also advised to submit its reply along with documentary evidence(s), if any, within 21 days from the date of receipt of the Enquiry SCN. Vide a reply dated October 8, 2018, the Noticee filed its reply to the Enquiry SCN stating:“…the matter had been placed before the Board of Directors in their meeting held on September 28, 2018, for consideration. After discussion and deliberation, the Board of Directors of the Company opined that since the date of license the company could not commence sub-broker ship business and keeping in view the prevailing circumstances, the Company is not in position to commence the same in near future. We have written letter no. SIFCL/2018-19 dated 03.10.2018 to IDBI Capital Market limited, Mumbai, with whom we are affiliated and initiated the process of surrendering the license. …”

4. Thereafter, upon completion of the enquiry, an Enquiry Report dated October 30, 2018 (“Enquiry Report”) was submitted by the DA to the Designated Member (“DM”). In the Enquiry Report, the DA had inter alia noted that considering the antecedents of Subrata Roy Sahara and the various judicial pronouncements against him and other Group Companies of Sahara, it is determined that the Noticee is not a ‘fit and proper person’ to continue as a sub-broker in the securities market.

5. In view of the above, the DA had observed that the Noticee had violated the following provisions of Regulation 7(2)(e) read with Schedule II of the Intermediaries Regulations and thus, was liable for action in terms of Regulation 23(a) of the said Regulations.

“Consideration of application.

2. Any application for grant of certificate:

(e) Where the applicant is not a ‘fit and proper person’ as stated in Schedule II; shall be rejected by the Board for reasons to be recorded by the Board in writing.

SCHEDULE II

Criteria for determining a ‘fit and proper person’

For the purpose of determining as to whether an applicant or the intermediary is a ‘fit and proper person’ the Board may take account of any consideration as it deems fit, including but not limited to the following criteria in relation to the applicant or the intermediary, the principal officer, the director, the promoter and the key management persons by whatever name called—

(a) integrity, reputation and character;

(b) absence of convictions and restraint orders;

(c) competence including financial solvency and networth;

(d) absence of categorization as a wilful defaulter.”

6. In accordance with Regulation 27 of the Intermediaries Regulations, the DA recommended that the Certificate of registration granted to the Noticee as a sub-broker be cancelled.

POST-ENQUIRY PROCEEDINGS BY THE DESIGNATED MEMBER:

7. A post-enquiry Show Cause Notice dated December 26, 2018 (“SCN”), was issued to the Noticee enclosing a copy of the Enquiry Report submitted by the DA and calling upon it to show cause in terms of Regulation 28(1) of the Intermediaries Regulations as to why action as recommended by the DA should not be imposed against the Noticee in terms of Regulation 28(2) of the said Regulations, as deemed fit by the DM. The Noticee submitted a reply dated January 24, 2019, to the SCN inter alia stating that it was awaiting a reply from M/s IDBI Capital Markets and Securities Limited (“IDBI Capital”) with regard to the voluntary surrender of both its sub-broker certificate (NSE and BSE) and had requested that SEBI kindly instruct IDBI Capital to cancel the Certificate of registration as surrendered by the Noticee.

8. Subsequent to the issuance of SCN, an opportunity of personal hearing was granted to the Noticee on the following dates, which were all adjourned at the Noticee's request:

a. July 11, 2019;

b. October 16, 2019;

c. March 2, 2020;

d. September 2, 2020.

9. Thereafter, a last and final opportunity of hearing was granted to the Noticee on December 2, 2020. Vide an e-mail dated November 28, 2020, the Noticee had once again requested for adjournment of the personal hearing. In view of the fact that four opportunities for personal hearing had earlier been granted to the Noticee, SEBI vide an e-mail dated December 2, 2020, informed the Noticee that no further adjournment will be granted in the matter. The Noticee was also informed that it may submit written submissions, if any, on the matter on or before December 11, 2020. The Noticee however, failed to appear for the hearing on December 2, 2020. Further, as on date, no reply on merits to the SCN/written submissions, have been received from the Noticee.

CONSIDERATION OF ISSUES AND FINDINGS:

10. I have considered the material available on record i.e. Enquiry Report along with the SCN. I note that the Noticee has not filed any reply/written submissions on merits for consideration during the course of these proceedings. The Noticee had also failed to appear for the personal hearing before me. I am therefore of the considered view that the Noticee has been provided with sufficient time to submit a reply to the SCN and also adequate opportunities to present its submissions before SEBI and defend itself against the allegations contained in the SCN, which is sought to be adjudicated in the instant proceedings. Keeping in mind the aforesaid, I am of the considered view that the instant proceedings against the Noticee be undertaken ex parte on the basis of the material available on record.

11. From the material available on record, the following is noted:

A. The details of Board of Directors and shareholders of the Noticee as per information received vide NSE's e-mail dated November 20, 2017, is as under:

TABLE I - BOARD OF DIRECTORS SR. NO. NAME 1. AJIT KUMAR DAULATRAO JADHAV 2. HOSHANG NOSHIRWAN SINOR 3. THOTHALA NARAYANSAMY MANOHARAN 4. O.P. SRIVASTAVA 5. JOY BROTO ROY

B. Further, the shareholding pattern of the Noticee company as on March 31, 2017, as provided by NSE, is as under:

TABLE II - SHAREHOLDING PATTERN SR. NO. NAME NO. OF SHARES % OF EQUITY HOLDING 1. SUBRATA ROY SAHARA 13,45,99,000 79.80 2. SWAPNA ROY 1,47,11,505 08.72 3. JOY BROTO ROY 9,45,88,93 05.61 4. O.P. SRIVASTAVA 9,45,88,92 05.61 5. ASHOK ROY CHAUDHARY 37120 0.02 6. ABDUL DABEER 37120 0.02 7. GAUTAM SARKAR 37120 0.02 8. JARNAL AHMAD KHAN 37120 0.02 9. A.K. SRIVASTAVA 37120 0.02 10. D.K. SRIVASTAVA 37120 0.02 11. I. AHMAD 37120 0.02 12. S.K. SHARMA 37120 0.02 13. T.N. ROY 37120 0.02 14. VIVEK SAHAI 37120 0.02 15. ZIA QADRI 37120 0.02 16. S.K. SINGH 37120 0.02 TOTAL 16,86,73,730 100.00

TABLE III - PREFERENCE SHARES SR. NO. NAME NO. OF SHARES 1. SUBRATA ROY SAHARA 40,00,00,000 2. JOY BROTO ROY 17,50,00,000 3. O.P. SRIVASTAVA 17,50,00,000

12. The following actions inter alia have been taken by SEBI against Subrata Roy Sahara and the Companies with whom he is associated (“Companies of the Sahara Group”):

i. SEBI vide an Order dated June 23, 2011, directed Sahara India Real Estate Corporation Limited (“SIRECL”) and Sahara Housing Investment Corporation Limited (“SHICL”) to refund the money collected through Optionally Fully Convertible Debentures (“OFCDs”) from the investors and restrained from associating themselves with any listed public company and any public company which intends to raise money from the public, till such time the aforesaid payments were made to the satisfaction of SEBI, Subrata Roy Sahara, Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, being the promoters/directors of SIRECL and SHICL. This Order of SEBI was confirmed by the Hon'ble Securities Appellate Tribunal (“SAT”) vide its order dated October 18, 2011. Thereafter, the italic>appeals filed by SIRECL and SHICL before the Hon'ble Supreme Court of India also got dismissed vide Order dated August 31, 2012. Vide the aforementioned Order and an Order dated December 5, 2013, the Hon'ble Supreme Court had inter alia directed SIRECL and SHICL to refund to SEBI the amount collected through Red Herring Prospectus dated March 13, 2008 and October 16, 2009, along with an interest @ 15% per annum from the date of receipt of the subscription amount till the date of repayment within three months from the date of that Order. Subsequently the Apex Court passed several orders/directions in the matter against Subrata Roy Sahara on account of delay in refunding the aforementioned amount.

ii. SEBI vide an Order dated July 28, 2015 had cancelled the Certificate of registration of Sahara Mutual Fund (“Sahara MF”) as it did not satisfy the ‘fit and proper person’ criteria. The impugned order was issued consequent to the findings by SEBI that Sahara India Financial Corporation Ltd. was not a ‘fit and proper person’ because its Promoter-Director was not a fit and proper person and hence, Sahara MF and Sahara Asset Management Company Private Limited (“Sahara AMC”) were no longer fit and proper to carry on the business of mutual fund. This SEBI Order was upheld by Hon'ble SAT vide its Order dated July 28, 2017 (Misc. Application no. 188 of 2017 and Appeal no. 428 of 2015) and thereafter, also by the Hon'ble Supreme Court vide its Order dated October 23, 2017 in Civil Appeal no. 12854 of 2017.

iii. SEBI vide an Order dated February 27, 2015, held that Sahara AMC does not qualify to be ‘fit and proper person’ to act as a Portfolio Manager in the Indian securities market and therefore, its request for renewal of Certificate of registration was rejected and the Certificate stood cancelled. Thereafter, vide an Order dated December 30, 2015, SEBI had rejected the application filed by Sahara AMC for reconsideration of the Order dated February 27, 2015. Subsequently, Sahara AMC had filed an appeal against the Order dated December 30, 2015, which was dismissed vide the Hon'ble SAT's Order dated October 31, 2017 (Appeal no. 72 of 2016).

13. In this context, I note that vide its letter dated July 1, 2019, the Noticee while seeking adjournment of the personal hearing scheduled on July 11, 2019, had stated:

We would like to mention that on the winding-up petition of the Reserve Bank of India (“RBI”) against the Noticee, a single bench of the Allahabad High Court passed the winding up Order on 15.02.2019 and appointed the Official Liquidator. On appeal before the (Division) Bench, the aforesaid winding up Order has been upheld by the Allahabad High Court on 13.05.2019. In an appeal against the Order of the Allahabad High Court, Hon'ble Supreme Court vide an Order dated 8.05.2019 directed:“Status quo, as on today, be maintained until further orders.”

Accordingly, the winding up proceedings in the Allahabad High Court also got adjourned till the final disposal of the Special Appeals in the Supreme Court.

14. As per information obtained from the Supreme Court website i.e. https : //main.sci.gov.in/case-status, the status of the aforementioned Special Leave Petition is indicated as pending for admission. In light of the aforementioned, I am of the view that the penalty, if any, proposed to be imposed under the Intermediaries Regulations may not have a bearing on the proceedings pending before the Hon'ble Supreme Court.

15. From the information obtained from the MCA21 Portal as on February 25, 2021, the following is observed:

A. The Board of Directors of the Noticee is as under:

TABLE IV - BOARD OF DIRECTORS SR. NO. NAME DATE OF APPOINTMENT 1. OM PRAKASH SRIVASTAVA 01.11.2011 2. MADHUKAR 31.10.2011 3. SATISH KUMAR SINGH 01.01.2016 4. JANARDAN SINGH 20.07.2015 5. BABITA CHAUHAN SINGH 27.03.2018 6. VIVEK SINGH 17.07.2019

B. Subrata Roy Sahara had resigned from the Board of Directors of the Noticee on March 22, 2017 (see also the observations of the Hon'ble SAT in its Order dated July 28, 2017, as reproduced at paragraph 3.8 of this Order).

C. The shareholding pattern in the Noticee as on December 30, 2020, is as under:

SAHARA INDIA FINANCIAL CORPORATION LIMITED

EQUITY SHAREHOLDERS

S.No First Name Middle Name Last Name Folio Number Number of Shares held Class of Shares 1 Shri Subrata Roy Sahara S00001 149273385 Equity share 2 Smt. Swapria Roy S00002 37120 Equity share 3 Shri Dm Prakash Srivastava O00001 9458893 Equity share 4 Shri Joy Broto Roy J00001 9458892 Equity share 5 Shri Ashok Roy Chowdhary A00003 37120 Equity share 6 Shri Abdul Dabeer A00001 37120 Equity share 7 ShriGautarn Sarkar K00001 37120 Equity share 8 Shri J. A. Khan J00002 37120 Equity share 9 Shri A Kumar Srivastava A00002 37120 Equity share 10 Shri Davendra Kumar Srivastava D00001 37120 Equity share 11 Shri Ishtiaque Ahmad 100001 37120 Equity share 12 Shri S Kumar Sharma S00005 37120 Equity share 13 Shri Tridip Narain Roy T00001 37120 Equity share 14 Shri Vivek Sahai V00001 37120 Equity share 15 Shri Zia Qadri Z00001 37120 Equity share 16 Shri Satish Kumar Singh S00004 37120 Equity share Total Equity Shareholders 168673730

PREFERENCE SHAREHOLDERS

S.No First Name Middle Name Last Name Folio Number Number of Shares held Class of Shares 17 Shri Subrata Roy Sahara 00004 40,00,00,000 Preference share 18 Shri Om Prakash Srivastava 00005 17,50,00,000 Preference share 19 Shri Joy Broto Roy 00006 17,50,00,000 Preference share Total Preference Shareholders 750000000

D. Accordingly, Subrata Roy Sahara continues to be a substantial shareholder in the Noticee.

16. I note that the Certificate of registration granted by SEBI to the Noticee is subject to compliance with the conditions specified under Regulation 7(2)(e) read with Schedule II of Intermediaries Regulations, which deal with ‘fit and proper person’ criteria. The aforesaid criteria is a continuous requirement to be satisfied throughout the period of validity of the Certificate of registration. It is the duty of SEBI to constantly monitor the ‘fit and proper person’ criteria of intermediaries to maintain the integrity of the securities market. It has to take into account the financial integrity, honesty, good reputation and character of the registered intermediary. As a watchdog of the securities market and protector of investor's interest, SEBI cannot take it lightly in view of the actions/proceedings carried out against a substantial shareholder/Promoter of the Noticee i.e. Subrata Roy Sahara and the Companies with whom he is associated. The ‘fit and proper person’ criteria in the present matter is required to be seen from a wider perspective as interpreted by the Hon'ble SAT in the matter of Jermyn Capital LLC v. SEBI (Order dated September 6, 2006), which is reproduced below:

9. “A reading of the aforesaid provisions of the Regulations makes it abundantly clear that the concept of a fit and proper person has a very wide amplitude as the name ‘fit and proper person’ itself suggests. The Board can take into account “any consideration as it deems fit” for the purpose of determining whether an applicant or an intermediary seeking registration is a fit and proper person or not. The framers of the Regulations have consciously given such wide powers because of their concern to keep the market clean and free from undesirable elements. It can take into account the financial integrity of the applicant and its competence. Absence of convictions or civil liabilities would be another relevant consideration which could weigh with the Board. Good reputation and character of the applicant is a very material consideration which must necessarily weigh in the mind of the Board in this regard. Reputation is what others perceive of you. In other words, it is the subjective opinion or impression of others about a person and that, according to the Regulations, has to be good. … In the case of a body corporate or a firm, the reputation of its whole time director(s) or managing partner(s) would come into focus. The Board as a regulator has been assigned a statutory duty to protect the integrity of the securities market and also interest of investors in securities apart from promoting the development of and regulating the market by such measures as it may think fit. It is in the discharge of this statutory obligation that the Board has framed the Regulations with a view to keep the market place safe for the investors to invest by keeping the undesirable elements out. The Regulations apply across to all sets of regulations and all intermediaries of the securities market including those who associate themselves with the market and they all have to satisfy the criteria of ‘fit and proper person’ before they could be registered under any of the relevant regulations and this criteria they must continue to satisfy throughout the period of validity of their registration and throughout the period they associate with the market. The purpose of the Regulations is to achieve the aforesaid objects and make the securities market a safe place to invest. One bad element can, not only pollute the market but can play havoc with it which could be detrimental to the interests of the innocent investors. In this background, the Board may, in a given case, be justified in keeping a doubtful character or an undesirable element out from the market rather than running the risk of allowing the market to be polluted. …”

17. As observed from paragraph 3.6, Subrata Roy Sahara is a Promoter and continues to hold substantial shareholding in the Noticee and therefore, is also capable of exercising control and influence over the management of the Noticee, thereby making it not a ‘fit and proper person’ in terms of Regulation 7(2)(e) read with Schedule II of the Intermediaries Regulations, to continue to act as a sub-broker. In this context, reliance is placed on the Order of the Hon'ble SAT dated July 28, 2017, in the matter of Sahara Asset Management Company P. Limited v. SEBI, Misc. Application no. 188 of 2017 and Appeal no. 428 of 2015 (which was upheld by the Hon'ble Supreme Court on October 23, 2017 in Civil Appeal no. 12854 of 2017):

10. “It is an admitted fact that Mr. Subrata Roy Sahara holds 79.80% of the equity capital of Sahara India Financial Corporation Ltd. (“Sahara Sponsor”) and 53.34% of its preference capital. Even after the resignation of Mr. Subrata Roy Sahara there is no change in this equity/preference holding. It is also a fact that the full equity/preference holding in the Sahara AMC is also held by the Sahara Sponsor and other Sahara Group Companies together though two of its group companies SIRECL and SHICL are not holding any equity in the Sahara AMC. It is also on record that Mr. Sahara was a Director in all the Group Companies which hold the shares of Sahara AMC. Such high shareholding in the sponsor by one promoter and in the AMC by the same promoter group companies clearly establish the capability of that one Promoter/Director to control the affairs of the Sahara Sponsor and thereby that in the Sahara AMC and Sahara Mutual Fund. Therefore, even if Mr. Sahara ceases to be a Director in the Sahara Sponsor, given the facts of the present matter, his ability to control the activities of the Sahara Mutual Fund cannot be doubted. This is made abundantly clear by the order of the Hon'ble Supreme Court dated May 6, 2014 … Therefore, the findings in the impugned order that Mr. Subrata Roy Sahara exercises full and complete control of the Sahara Sponsor and Sahara AMC cannot be disputed. In view of this, Mr. Sahara's resignation from the Board of Directors of the Sahara Sponsor on March 22, 2017 does not alter the ground reality regarding his control over the Sahara Sponsor in which he continue to hold about 80% of the equity capital.

15. The present appeal before us is regarding the fit and proper status of a Promoter/Director of Sahara Sponsor who holds about 80% of its capital and who controls all Sahara Group Companies and hence, on the fit and proper status of Sahara Sponsor to continue as Sponsor of a mutual fund in the context of SEBI/Supreme Court Orders against Mr. Sahara and two Sahara Group Companies. The Mutual Fund Regulations state that the Sponsor Company as well as its Key Managerial Persons or Key Person who controls the Company is to be fit and proper. No cited judgments are issued in the context of the securities market wherein the SEBI Act, 1992 and Regulations under this Act were examined. In the securities market, SEBI Act empowers SEBI to take actions in the interest of protecting the interests of the investors and hence lifting the corporate veil to the extent to identify who controls a regulated entity cannot be faulted. Without such a power SEBI will be a mute spectator to many of the corporate misdeeds which may jeopardize the interests of investors. Given the mandate of SEBI to protect the interests of the investors in the securities market SEBI is statutorily empowered to lift the corporate veil and find out the truth whenever interests of the investors are affected or likely to be affected. In the instant case SEBI itself found that two group companies of Sahara and its Directors were not conducting their business following the rules relating to public issue and were restrained from associating themselves with any listed Company or Company which intends to raise money from the public. It was also found that one of the Promoters/Directors is prima facie holding absolute control over the group companies. Given these facts and circumstances, lifting the corporate veil to the extent of identifying the role of the Promoter/Director in the impugned order cannot be faulted. …

16. In the result, we find no merit in the appeal. Accordingly, appeal is dismissed with no order as to costs”

18. Incidentally, from the information obtained from the MCA21 portal, it is also noted that Om Prakash Srivastava, present Director in the Noticee, was earlier also a Director in Sahara AMC, whose Certificate of registration to act as a Portfolio Manager was cancelled vide SEBI Order dated February 27, 2015, which was subsequently upheld by the Hon'ble SAT vide its Order dated October 31, 2017 (see also paragraph 3.3. iii).

19. For the reasons mentioned in the preceding paragraphs, I am in agreement with the findings of the DA that the Noticee is not a ‘fit and proper person’ in terms of Regulation 7(2)(e) read with Schedule II of the Intermediaries Regulations. Having regard to the facts and circumstances of the instant proceedings, I accept the recommendation of the DA that the Certificate of registration granted to the Noticee as a sub-broker, be cancelled. This Order is being passed under Regulation 27(5) of the Intermediaries Regulations, which substituted Regulation 28 of the aforesaid Regulations, with effect from January 21, 2021.

ORDER—

20. I, in exercise of the powers conferred upon me under Section 19 read with Section 12(3) of the SEBI Act and Regulation 27(5) of the Intermediaries Regulations, hereby cancel the Certificate of registration of the Noticee, i.e. Sahara India Financial Corporation Limited, (sub-broker having SEBI Registration Nos. : BSE - INS018655139 and NSE - INS238266238).

21. This Order shall come into force immediately on the expiry of twenty one (21) days from the date of this Order.

22. A copy of this Order shall be served on the Noticee immediately. A copy of this Order shall also be served on the recognized Stock Exchanges and Depositories.