RBI moves apex court against SIFCL

The Reserve Bank of India, on Thursday moved to Supreme Court against the Allahabad High Court decision in the favour of Sahara India Financial Corporation (SIFCL) granting it to use the public deposits for its para-banking operations for raising funds. The Central Bank had barred the para-banking operation of SIFCL, which SIFCL has challenged it in the Allahabad high court on June 04.

The RBI on Wednesday outlawed SIFCL to begin the para-banking operations from the public deposits for the sake of investors, as ‘this act of SIFCL may be malicious for the investors.’

The SIFCL had challenged it by moving to the vacation Bench of the Allahabad HC on Wednesday and got a stay order on the basis of argument, ‘earlier RBI had given a clean chit to SIFCL operations in a PIL proceeding.’

In this response, within 24 hours of the Allahabad HC decision, RBI moves to Apex court challenging the Allahabad HC’s decision alleging that HC decision may spell disaster for investors who are around 2.5 crores in numbers.

The apex court has postponed the hearing to Monday (June 09) providing the earliest possible date for the hearing. T R Andhyarujina, the senior counsel for RBI has urged the hearing Bench comprising Justices Arijit Pasayat and P P Naolekar for providing the earliest possible date for hearing to solve the problem as soon as possible to prevent Sahara for using public deposits in its own interest, which future is uncertain, as per sources said.

Arguing in the court, Andhyarujina alleged that the Allahabad HC decision to allow SIFCL to continue para-banking operation from public deposits which is nearby Rs.18,000-crore may prove malicious for its 25 million depositors.

So, for the sake of public interest, RBI has imposed ban on using public investment for parabaking operation of SIFCL. Andhyarujina from RBI has also alleged SIFCL for violating the norms of governing maintenance of direct investments and payment of minimum rate of interest prescribed under the Residuary Non-Banking Company (RB) Directions, 1987. The Apex Bank has also accused SIFCL for violating the KYC (Know Your Client) norms stipulated for opening of deposit accounts.

On the other hand, SIFCL counsel Mukul Rohtagi could not get the opportunity to argue as court deferred the date for Monday.

The SIFCL on the other hand also filed caveat in the apex court for predicting that the apex court decision may go against it. This caveat would ensure Sahara to put its argument before the apex court while hearing the RBI petition. Now, Sahara can also put its argument before the apex court and it would prolong the legal duel.

Earlier, RBI had directed SIFCL to follow strictly all the applicable provisions of the RBI Act, directions, guidelines, instructions and circulars with full interest, which RBI issues time to time for all financial institutions.

SIFCL is the arm of Sahara India, which has interest in mutual funds, insurance, real estate and media and owned by Subroto Roy. There are 7 lakhs employees and field agents of SIFCL.