The Sahara India Pariwar Saga

Here’s yet another turn in Sahara-SEBI war. Subrata Roy, CEO and group chairman of Sahara Group has approached the Supreme Court to postpone the hearing scheduled for April 22. That’s when Justice K.S. Radhakrishnan is expected to consider SEBI’s petition to detain Subrata Roy and directors Ashok Roy Choudhary, Ravi Shankar Dubey, and Vandana Bhargava to initiate contempt proceedings against them.

English: At home of Subrata Roy Sahara

Sahara Group was instructed by the Supreme Court in August 2012 to refund ₹24,000 crore to investors in 3 months, along with 15% interest. The charge on Sahara Group, its CEO, promoters and directors is that the firms Sahara India Real Estate Corp. Ltd. (SIRECL) and Sahara Housing Investment Corp. Ltd. (SHICL) raised funds through optionally fully convertible debentures (OFCD) without complying with prudent disclosure and investor protection norms such as notifying investors when their deposit matures or KYC norms. Moreover, majority of investors in Sahara’s scheme come from rural villages and small cities who were attracted by the interest rate but have no idea what OFCD means.

SEBI argues that under the guise of Residual Non-Banking Corporations (RBFC) distributing OFCDs, the firms were running regular deposit schemes and para-banking activities – a breach of SEBI regulations and the Companies Act. An OFCD scheme runs only 10 days while Sahara has been collecting money for years – from over 23 million people. That too in a highly irresponsible manner as their investor records show – incorrect names and addresses, no nominee record, etc. In effect, if an investor does not come to Sahara with debenture papers, the money will stay in Sahara’s pockets – an observation made by courts too.

SIRECL had collected ₹19,400.87 crore from investors by March 2008 and SHICL ₹6,380.50 crore. With the 15% interest, Sahara must pay back over ₹38,000 crore to investors. The company claims 86% of the funds have already been refunded except ₹5,120 crore which they have paid to SEBI on the court’s order.

Since Sahara has failed to make further expected payments to SEBI and their investor records show bizarre gaps that could mean they are bogus, SEBI has passed an attachment order on bank accounts and assets associated with SIRECL and SHICL. Sahara has filed an appeal with Securities Appellate Tribunal (SAT) to appeal on this issue on April 20.

Sahara claims that SEBI has no jurisdiction in the OFCD matter as they are a privately held company and hence answerable only to the Ministry of Corporate Affairs. This argument does not wash with the Supreme Court of India or SEBI.

What of the investors that Sahara accepted money from? Roy claims that none of his 110 million investors have anything to complain about. But reports have come in of strong-arm tactics towards investors who are coming in with their papers and conversion of investments to Roy’s newest venture Q-shop without investor’s consent.

Meanwhile, Sahara Group has acquired acres of land in Delhi, Gurgaon, Mumbai and purchased controlling stakes in hotels abroad with possibly the funds accumulated from SIRECL and SHICL. That’s not a crime but it rightly raises questions for which Sahara doesn’t have convincing answers. Is it the road to doom for Sahara or will Subrata Roy’s entrepreneurial soul find a way out yet again?


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