Are OFCDs ‘securities’ under Indian law?

Yes. The Supreme Court held that OFCDs fall within the meaning of ‘securities’ for SEBI, Companies Act and SCRA purposes, even if called hybrid instruments.

When does a private placement become a public issue?

If an offer is made to fifty or more persons, Section 67(3) treats it as a public offer. Then listing and other public issue rules apply.

Who had jurisdiction—SEBI or MCA?

SEBI. Under the SEBI Act and Section 55A of the Companies Act, SEBI could investigate and adjudicate to protect investors in such issues.

Is listing optional for public issues?

No. Section 73(1) is mandatory for public issues; intention of the company does not control compliance.

Do 2003 Preferential Allotment Rules apply here?

No. Those rules apply to preferential allotments of unlisted companies; once it is a public issue, the 2003 Rules do not govern.

Sahara India Real Estate Corporation Ltd & Ors. v. SEBI of India

Supreme Court of India

2013

Supreme Court Bench

(2013) 1 SCC 1

Securities • Company Law • SCRA

~9 min read

OFCDs public issue SEBI powers SCRA & Companies Act

Author: Gulzar Hashmi LOCATION: India PUBLISH_DATE: 23 Oct 2025 Slug: sahara-india-real-estate-corporation-limited-ors-v-sebi-of-india

Quick Summary

Sahara group companies raised about ₹17,656 crore through OFCDs from ~3 crore people, calling it “private placement”. SEBI stepped in. The Supreme Court held: offers to 50 or more are public issues; OFCDs are securities; SEBI has power to act; listing and investor protection norms are mandatory.

PRIMARY_KEYWORDS: OFCDs, public issue
SECONDARY_KEYWORDS: SEBI powers, SCRA 2(h), Sec 67(3), Sec 73
PUBLISH_DATE: 23-10-2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India

Issues

Does SEBI have power to investigate and adjudicate under Sections 11, 11A, 11B of the SEBI Act and Section 55A of the Companies Act, or does MCA control under Section 55A(c)?
Do hybrid OFCDs fall within “securities” under the SEBI Act, Companies Act and SCRA?
Was the Sahara OFCD issue a private placement despite being offered to millions?
Is listing under Section 73 mandatory for public issues, or does it depend on company intention?
Do the Public Unlisted Companies (Preferential Allotment) Rules, 2003 apply?
Are OFCDs “convertible bonds” exempted from SCRA via Section 28(1)(b)?

Rules

Companies Act: Sections 55, 67(3) (50+ offerees = public issue), 73 (compulsory listing for public issues).
SCRA: Section 2(h) (securities definition), Section 28(1)(b) (limited exemptions).
SEBI Act: Sections 11, 11A, 11B (SEBI’s protective and enforcement powers).

Investor Protection Securities Regulation

Facts (Timeline)

25 Apr 2008: SIRECL & SHICL start issuing OFCDs; label it “private placement”.

2008–2011: ~3 crore subscribers; ~₹17,656 crore raised without full public issue compliance.

23 Jun 2011: SEBI Whole Time Member orders refund; promoters (incl. Subrata Roy) restrained.

18 Oct 2011: SAT upholds the SEBI order.

2013: Appeal to the Supreme Court—present judgment delivered.

Timeline of key facts in Sahara India v. SEBI

Arguments

Appellants: Sahara Companies

OFCDs were private placement; SEBI lacked jurisdiction—MCA governed.
OFCDs were hybrids/convertible; outside SCRA or not “marketable securities”.
Listing was not mandatory; company never intended to list.
Preferential Allotment Rules, 2003 should apply instead.

Respondent: SEBI

Offers to 50+ persons are public issues—Section 67(3).
OFCDs are “securities” under SCRA 2(h); investor rules apply.
SEBI empowered under Sections 11, 11A, 11B & Companies Act Section 55A.
Section 73 listing is mandatory for public issues.

Judgment

Appeal dismissed/SEBI sustained. The Supreme Court affirmed SEBI’s jurisdiction to investigate and adjudicate. OFCDs are securities. An offer made to fifty or more persons is a public issue. Listing requirements under Section 73(1) are compulsory. Preferential Allotment Rules, 2003 do not apply once it is a public issue. Section 28(1)(b) SCRA does not exclude such debentures.

Ratio (Key Rule)

Any offer to ≥50 persons is a public offer (Companies Act, Section 67(3)). Public issues must comply with listing and disclosure (Section 73). OFCDs are “securities” under SCRA 2(h). SEBI may act under Sections 11/11A/11B and Section 55A of the Companies Act.

Why It Matters

Protects small investors from disguised public issues.
Clarifies SEBI–MCA lines on securities oversight.
Sets strong compliance standard for “hybrid” instruments.

Key Takeaways

50+ offerees = public issue; private placement defence fails.
OFCDs = securities; SCRA/SEBI/Companies Act apply.
Listing under Section 73 is mandatory for public issues.
2003 Preferential Allotment Rules do not override public issue norms.
Section 28(1)(b) SCRA is a narrow exemption; does not cover these debentures.

Mnemonic + 3-Step Hook

Mnemonic: “50 = PUBLIC, LIST & PROTECT.”

50: Offer to fifty or more → public issue.
List: Section 73(1) listing is mandatory.
Protect: SEBI powers ensure investor protection.

IRAC Outline

Issue

Was the OFCD offer a public issue attracting SEBI/Companies Act/SCRA compliance, and did SEBI have jurisdiction?

Rule

Companies Act 55, 67(3), 73; SCRA 2(h), 28(1)(b); SEBI Act 11, 11A, 11B.

Application

Offer reached far beyond 50 persons; instruments were marketable securities. Thus public issue norms and SEBI oversight applied.

Conclusion

SEBI’s action upheld; OFCDs treated as securities; listing and public issue compliance mandatory.

Glossary

OFCD: Optionally Fully Convertible Debenture—may convert into shares as per terms.
Public Issue: Offer made to the public; in law, 50+ offerees triggers public offer rules.
Listing: Admission of securities to a recognised stock exchange; mandatory for public issues.