Sucheta Dalal :SEBI scores big with Sahara
Sucheta Dalal

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SEBI scores big with Sahara  

September 3, 2012

 After the landmark verdict by the apex court, Subrata Roy-led Sahara Group has come out with full page ads in various newspapers. This is childishness and only underlines the dangers of allowing this group to keep expanding without regulatory checks and balances

Sucheta Dalal

In hindsight, it was probably a blunder for the shadowy Sahara Group to challenge the Securities Appellate Tribunal (SAT) in the Supreme Court. Having to cough up Rs24,000 crore in three months (Rs17,400 crore plus 15% interest) would sent jitters even through the finance ministry. And here is a corporate group, whose finances are most opaque, which is being asked to pay the money to millions of investors, who have never been seen or heard by most of us in the media world.


At a time when reports about rampant corruption are depressing the most optimistic Indians, the Sahara judgement is yet another one that re-establishes our faith in the judiciary. The speed with which the hearings were conducted by the Securities Appellate Tribunal (SAT) as well as the Supreme Court of India (which ensured that the case move forward swiftly even when the court was on vacation) shows that when it is a matter of importance, our judiciary is not slow. The clarity, lucidity and toughness of the 263 page judgement  delivered by justices KS Radhakrishnan and Jagdish Singh Khehar, is also a landmark because it  settles several issues of conflict and interpretation between different statutes and established the regulatory jurisdiction of the Securities and Exchange Board of India (SEBI) over financial instruments concocted to avoid disclosures and clearances (see Vinod Kothari’s article  ).


The crux of the matter is that two Sahara group companies—Sahara India Real Estate Corporation and Sahara Housing Investment Corporation (referred to as the ‘Saharas’ by the Supreme Court) challenged a SEBI order asking them to refund money raised through Optionally Fully Convertible Debentures (OFCDs) that were floated without seeking regulatory clearance nor planned to be listed on the bourses as required by law.

The judgement is also a massive triumph for senior counsel Arvind Datar, who was pitted against a galaxy of legal luminaries led by Fali Nariman, who left no stone unturned in trying to allow his clients, the two Sahara companies to escape the spotlight of regulatory attention.

As strange as it may seem, information about the Sahara Group’s finances is inversely proportional to its high public image. The logo is emblazoned on the outfits of our cricketers for decades, and the entire cricket team and a long list of movie stars are willing to lend their name to buttress its credibility. It makes news for snapping up prestigious global hotels like New York’s landmark Plaza Hotel and London’s Grosvenor House Hotel and for its bid to acquire the landmark Taj Mansingh (which has been managed by the Taj group for decades). It is allowed to start and close down an airline. And yet, the finances of most group companies are unknown since it operates in the unlisted space.




In fact, until SEBI showed the courage to take the ‘hybrid’ optionally fully convertible debentures (which Fali Nariman argued should be outside SEBI’s supervision because they were so concocted) most regulators and enforcement agencies, including the Reserve Bank of India (RBI) have been extraordinarily soft on the group.

(See Payment Promises  , Extension to Payments   and Never be-Sahara )

The Sahara Group seems to have great difficulty in understanding the role and sanctity of India’s regulatory and judicial process. All through its battle with SEBI, it has frequently issued full page advertisements in the media, making fanciful claims and questioning the regulator’s action. In a statement to the media, group chairman (he calls himself chief worker) Subrata Roy even claimed that the move was dictated by excessive regulatory restrictions in the financial sector.

The same lack of comprehension or deliberate obfuscation is evident in its response to the Supreme Court order as well. The group has again issued full-page advertisements today, titled “EMOTIONALLY SPEAKING” (we have tried to retain the emphasis and typeface) with another set of nonsensical claims and laments, which we present with our interpretation.



                                                       EMOTIONALLY SPEAKING

1.In 2008/2009 Sahara filed its RHP under the provisions of the Companies Act with the Ministry of Corporate Affairs, which was duly registered and approved by them on the same basis as was done in 2002 for an earlier issue of Sahara.  The earlier issue was duly closed and registered with the competent authority in 2008 along with the list of all investors running into millions.

Moneylife (ML): The whole point of the issue decided by the Supreme Court is that Sahara has been using a pliant and friendly ministry of corporate affairs (MCA) to avoid stricter disclosures, compliances by SEBI.

2. Any country’s system will collapse if after getting clear, clean permissions from country’s competent Government’s Regulator, the company is so severely punished.  Meaning, lawful bona-fides are severely punished with retrospective effect.

ML: We will wait to see whether this comment on the Supreme Court’s decision goes unchallenged. A top lawyer sources tell us that they are studying the issue and may take it up before the apex court.

3.Here we want to inform all our Hon’ble depositors and investors that you need not worry about anything and be at absolute peace since as Sahara is the most dutiful and absolute honest custodians of your money and by the grace of God, we are so healthy with all-round strength that there cannot be even one day delay in any payment commitment of Sahara.

ML: This is funny, because the apex court itself has doubts about whether Sahara’s investors are fictitious. That is why it has detailed an elaborate reporting process. The court has said: “If the documents produced (including original debenture applications) are not found to be genuine, SEBI is at liberty to start an investigation.” If the regulator is unable to verify the existence of subscribes the amount will be forfeited by the government of India. The apex court has further ensured that the process if water-tight by appointing justice BN Agrawal, a retired Supreme Court judge to oversee whether the directions issued by it are effectively complied with by SEBI as well as the Saharas.

4. In the last 33 years there is not a single complaint of non-payment, whereas we have paid around Rs1,40,000 crores maturity/redemption and against the enrolment of around 12 crores investors.

ML: Answered by the point above

5. People cannot accept Sahara’s meteoric growth. Instead of being appreciated, all along we have been at the receiving end of the bashing from all authorities again and again.

ML: The portrayal of regulatory actions of RBI, SEBI and SAT followed by a landmark judgement by the Supreme Court is breathtaking in its childishness and only underlines the dangers of allowing this group to keep expanding without regulatory checks and balances.

6. All along for the past 7-8 years we have felt and faced the onslaught of various authorities since they concluded whimsically without any verification that the deposits, investments we have received from the public are fictitious and bogus as they feel the money with us is ill-gotten from politicians, etc.

ML: Again, no data was produced even before the Supreme Court, leading to such as stringent order.

7. Firstly, Income Tax Department held on to our refund for decades to the tune of around Rs2,000 crores, but ultimately it was truth that prevailed, they verified and verified and ultimately they had to pay us back the entire amount in the year 2011.

ML: Now that this claim is made in writing, Right to Information (RTI) activists can probably seek proof about whether this is indeed true in the manner claimed by Sahara.

8. Reserve Bank of India, in 2008, killed our financial inclusion based RNBC activities and gave us 7 years’ time to repay our depositors, which we cleared in just 4 years.

ML: Moneylife reports on this are self-explanatory RBI action:

a) Promises repayment:

b) Extends repayment:

c) Games companies play: Never be-sahara


9. Of course we shall never blame the Respected Judges of Hon’ble Courts of our beloved country.  However, it is the fault of the machinery which presents the facts incorrectly and in such a manner so as to create a false and negative perception so as to convince the Hon’ble courts that Sahara has collected unbelievably large sums of money from public which are actually ill gotten and fictitious.

ML: The best, most expensive and most revered legal brains in the country were retained by Sahara to present its case and a simple reading shows that they left no stone unturned in twisting the interpretation of various rules and regulations to benefit the company.


ML: Why wasn’t the data provided to SEBI or to the Supreme Court? The apex court has given the Saharas 10 days to produce verifiable data on investors alone with application forms.

11. Further we claim with challenge that each and every rupee we have accepted in last 33 years is always against receipt from the company and with an application form duly signed by the Hon’ble depositors/investors. Every rupee which has come to Sahara can be verified by the authenticity of the depositors/investors. WE INVITE THE CONCERNED AUTHORITIES OF THIS COUNTRY TO COME AND VERIFY.

ML: Laughable after a Supreme Court order.


 ML: Why was the data not produced in court or before the regulator for over two years? The next three points are mere ranting that need no comment but only underline the bizarre world which the ground inhabits and has been able to raise Rs73,000 crore of public deposits –according to its own advertisement in the papers.

13. Even we would like to mention that all along MCA, RoC and Sahara were lawfully (as per the Company’s Act) absolutely right, everyone’s problem is why and how can Sahara raise so much of funds from public. Irresponsible people only conclude that this is all ill-gotten money and from the politicians, whereas around 90% of our depositors, investors are those very small investors, who never go to banks and banks too never reach them.

14. We should rather always get a pat on our backs for such good social work. Had our committed ten lakh workers not gone to those small depositors they would have spent those monies in alcohol or gambling, etc, we are saving their monies and bringing them to the nation’s mainstream and thus helping those poor people for their better future out of forced savings.

15. The saddest part is sitting on the chair in air conditioned offices, they imagine and allege and never bother for any sort of verification.

16. If we continue to write about THE INJUSTICE WE HAVE FACED FROM SO FAULTY A SYSTEM OF OUR COUNTRY probably huge space will be required. Let us not go for those, but we should write here that for the future interest of our country these totally unjustified tortures are responsible for India’s corporates (Big, medium or small) continuously developing business outside the country and good brain run away from the country.  Of course, we at Sahara, we are not escapists.  We shall fight against the system and grow in our beloved country for the growth of our country.

Through our expansion programs in next 2 to 3 years we shall provide permanent salaried employment of around 3 lakhs people apart from around 5 lakhs new introduction of field workers.  Meaning Sahara shall be providing livelihood to around 18 Lac families.

ML: In the light of the claims in this advertisement and the Supreme Court judgement will the government and its various regulators simply stand by and allow the Sahara group to expand and grow as before? Will any of our political parties, either the ruling Congress, the Samajwadi Party, the communists or the Bharatiya Janata Party demand scrutiny or answers?


-- Sucheta Dalal