File Photo: Sahara Group chief Subroto Roy
Slapped with a $350 million lawsuit seeking attachment of its two prized hotels here, crisis-ridden Sahara has told a US court in New York that it has been wrongly dragged into a dispute between two entities over "a potential business relationship gone sour".
Seeking an immediate rejection of a plea by Hong Kong-based JTS Trading to attach Sahara's Plaza and Dream Downtown hotels in New York, the Indian conglomerate has submitted before the Supreme Court of the State of New York that the "plaintiff is attempting to attach property that falls outside of the jurisdiction of this Court."
"Even if the Court were to ignore the obvious jurisdictional deficiency, Plaintiff would not be entitled to the relief it seeks because it is seeking to attach the property of non-parties that are not implicated by the allegations in the complaint," Sahara said in a submission before the Court.
Sahara, along with two others, has been dragged into this $350 million (Rs 2,200 crore) lawsuit filed by JTS Trading Ltd, which had apparently proposed to partner UAE-based Trinity White City Ventures and arrange loans from Swiss banking giant UBS to acquire Sahara's three overseas hotels - Grosvenor House in London and the two in the US.
In the lawsuit filed against Trinity, Sahara and UBS, JTS has alleged that Trinity cut it off from the deal for direct negotiations with Sahara. JTS has also accused Sahara and UBS of having "aided and abetted" the UAE firm in breaching its "fiduciary duties" under their agreement.
Looking into the suit, the court had last month passed an 'order to show cause', asking Sahara India Pariwar to show cause in the court why "an order should not be made" for attaching the group's interest in the Plaza and Dream Downtown hotels in New York.
In its submissions made before the court through its counsel here, Sahara has now said that JTS was seeking "to attach property owned by entities over which this court has no jurisdiction, and property owned by non-parties that are not accused of any wrongdoing, in the context of claims that are tenuous at best".
"The complaint and affidavits underlying the Order to Show Cause paint a picture of a dispute between JTS and Trinity White City Ventures Limited over a potential business relationship gone sour," it further said.
Sahara said it was true that a group entity Aamby Valley Mauritius had intermittent discussions in recent months with Trinity for a possible loan transaction, but there was no basis for JTS' allegations that Aamby Mauritius was aware of the nature of the relationship between JTS and Trinity, or of any alleged breach of fiduciary duty by Trinity owed to JTS.
JTS has also engaged a law firm in India "to carry out research, review and analysis" in relation to actions or proceedings being faced by Sahara Group under various laws, specifically Prevention of Money Laundering Act, Foreign Exchange Management Act as well as other legislations concerning regulation of financial markets in India.
Sahara also rejected the allegations that it was trying to "strip away the assets" of the two hotels.
It further said that Sahara entities will suffer harm if an order for attachment is issued, while adding that JTS was trying to block the group from engaging in any financial transaction in relation to the hotel properties by way of refinancing the existing loans or a sale of the properties.
Reacting to the lawsuit, Sahara Group had earlier said in a statement that "the lawsuit is brought against Trinity White City Ventures Ltd, which was apparently a potential joint venture partner of JTS Trading in a potential bid by Trinity to refinance our two hotels in New York and one in London."
"Sahara was at one time in discussions with Trinity but had no knowledge of the dealings between Trinity and JTS," the statement said.
"This is a private dispute between two parties who have had a falling out," Sandeep Wadhwa, Head of Corporate Finance at Sahara Group, had said in the statement.
"JTS' attempt to drag Sahara into this dispute is based on false allegations and we are confident that JTS's claim will not survive the preliminary stages of the proceedings. Sahara intends to defend the lawsuit vigorously," he added.
As per the documents filed with the court by JTS, it had formed a venture with Trinity earlier this year to buy the three hotels from Sahara, which has been seeking to arrange funds to ensure release of its chief Subrata Roy and two other top executives from Tihar Jail in New Delhi.
Sahara sources said this lawsuit will have no bearing on its fund-raising exercise as a deal is already in final stages with another investor.
JTS was to invest $850 million for a 70 per cent stake in a private equity fund for the acquisition, while Trinity was to contribute $250 million for a 30 per cent stake. UBS was to provide senior debt facilities for the transaction.
JTS, which also claimed having been appointed 'exclusive arranger of fund', further said that the proposed 'Sahara portfolio' transaction was earlier pegged at $1.1 billion, but later it was revised upwards to $1.5 billion.
Interestingly, Sahara group last month announced that it has reached a deal with another party, Reuben Brothers, for transfer of its existing debt from Bank of China on the three hotels - thus averting a 'default-triggered' sale of the iconic Grosvenor House hotel in London.
The Grosvenor House hotel was put on sale by its lender Bank of China earlier this year after a 'technical default'. Sahara Group has been trying to raise funds to secure release of its Chairman Subrata Roy, who has been lodged in Tihar Jail for over a year, through monetisation of its various assets, including the three overseas hotels that it had purchased between 2010 and 2012 for $1.55 billion.
The group has been engaged in a legal battle with markets regulator SEBI for a long time over a case involving raising of funds from investors to the tune of over Rs 24,000 crore.
Sahara, however, claims it has already repaid 95 per cent of the investors' money directly.