The Supreme Court today directed Sahara India Financial Corporation Ltd to approach the designated authority of the Reserve Bank of India (RBI) on Thursday to convince it that its financial activities are in order.
The authority shall hear all concerned parties and pass a fresh order. Meanwhile, the order of the Allahabad High Court against the RBI and the RBI order against the financial company will not operate.
The order was passed by a Bench headed by Justice Arijit Pasayat on the appeal of the RBI against the high court order passed last week. The central bank had prohibited the non-banking finance company from accepting fresh deposits. That order was stayed by the high court which led to the appeal by the RBI.
According to Sahara, it did not get adequate opportunity to reply to the show cause notice issued by the RBI. The latter also complained that the high court passed the stay order against it in a hurry.
Therefore, the judges came up with the formula that the whole process should start all over again. Thus the litigation in both the high court and the Supreme Court ended with today's order.
Counsel for the RBI, TR Andhyarujina, justified the restrictions imposed on the activities of Sahara alleging irregularities and implications on the depositors. The firm had violated the RBI guidelines. However, counsel for Sahara, Mukul Rohtagi, pointed out that there was not a single complaint from depositors.
The judges did not allow them to go into the merits of the issues involved as they had already come with a concrete suggestion.
Both sides agreed to the court's recipe for solving the problem outside the court. The RBI said that it would not enforce its order and a fresh one would be passed. Sahara also appeared happy as it can now approach the authority with material to justify its activities and the RBI restrictions would not operate against it.
The RBI order had affected around 5 crore depositors with a cumulative deposit of Rs 18,000 crore.