Since 2010, when the Securities and Exchange Board of India (SEBI) first raised questions about the Sahara group, the agencies and institutions that have looked into the matter including SEBI itself, the Security Appellate Tribunal (SAT), the Allahabad High Court, the Supreme Court, the Enforcement Directorate (ED) and the Ministry of Corporate Affairs have repeatedly brought up one issue, Saharas intent.
SEBIs attention was drawn to Sahara when it was approached by Sahara Prime City for an initial public offering. SEBI raised questions on the Optionally Fully Convertible Debentures (OFCDs), a hybrid financial instrument, to the tune of Rs 24,000 crore issued by two sister concerns, Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL), and whether these were for public placement and hence came under SEBIs jurisdiction.
In a show-cause notice to SIRECL and SHICL, then SEBI member K M Abraham said, The very fact that the offer was made to friends, associates, Group Companies, workers/employees and other individuals who are associated/affiliated or connected in any manner with Sahara India Group of Companies, by itself would indicate the intention of the offer or to make the offer to wider gamut of people.
Sahara argued that it did not come under SEBI purview as it did not intend to make public placement of the OFCDs.
In April-May 2011, Saharas senior advocate Arvind Datar quoted from a landmark British case Young vs Bristol Aeroplane Co Ltd before SAT to argue that Sahara should be judged by what they did, not what they intended.
When SEBI asked for details of those who had subscribed to Saharas OFCDs, the group first said their staff were on a long holiday and so it could not provide the details. A SEBI officer involved in the investigation from the beginning said, It was clear that they did not want disclosure. Their intentions were our problem.
THE MINISTRYS ENTRY
Asked to furnish details to SEBI, Sahara in June 2010 forwarded a letter from the office of then minister of state for corporate affairs Salman Khurshid, stating that his ministry was examining whether the issue under SEBIs scrutiny was a matter of the ministrys jurisdiction. Sahara argued that they were guided by the Companies Act. SEBI made it clear that there was no such official communication between the ministry and it.
Sahara next approached the Allahabad High Court, which granted a stay on SEBIs proceedings. Meanwhile, even as the Ministry of Corporate Affairs gave an affidavit in the high court supporting Saharas stand, the arguments against this contiunued within the ministry.
In February 2011, the ministry sought legal opinion. Then additional solicitor general Parag Tripathi said the matter fell in the domain of SEBI. However, the ministry sought a second opinion, from another ASG, present Solicitor General Mohan Parasaran, who favoured the ministrys stand.
A note put up internally within the ministry in April 2011 said, The first proviso to Section 67(3) inserted by the Companies (Amendment) Act 2000 with effect from 13.12.2000 sets at rest the question by stating that if an invitation to subscription is made to 50 or more persons, it ceases to be a private placement.
Arguing against Datar in SAT, the government lawyer, meanwhile, said he hadnt read Parag Tripathis opinion as it was not in the records provided to him. By the time the ministry decided in June 2011 that it wouldnt interfere in the case, SEBI had won in SAT. In October 2011, SAT directed the two Sahara firms to refund Rs 24,029 crore within six weeks to over 29 million investors.
THE 5,984 KALAWATIS
While maintaining a stay on proceedings against Sahara, the Allahabad High Court as well as then chief justice of India S H Kapadia had asked the group to provide the information sought by SEBI.
In April 2011, Sahara deposited an encrypted CD containing details of the subscribers of the OFCDs, without providing the password. Angered, the high court vacated the stay, saying that for it, Sahara had to thank their own stars.
The investigation now picked up pace, with SEBI directing Sahara to refund investors with 15 per cent interest and forwarding a copy of the order to various investigating agencies.
SEBI and the ED also told the apex court that the three crore investors listed by Sahara were not genuine. SEBI, for example, said it had found 1,433 entries in the name of Aniruddh Singh from one address.
An Indian Express report of May 2, 2013, noted that the Sahara list of OFCD subscribers had the name Kalawati 5,984 times, apart from multiple entries with the same addresses, or from places that didnt exist.
In 2012, the Registrar of Companies opened a complaint registry for Sahara investors in Kanpur. According to Ministry of Corporate Affairs officials, only 47 complaints have been registered so far. It is strange, says a source in the ministry. For instance, when a similar scheme with far less magnitude, Saradha Chit Funds, went down, there where riots and self-immolations. The investors of Sahara do not seem to be bothered, though Rs 20,000 crore are at stake.
THE MYSTERIOUS CASH
In August 2012, the FIU (Financial Intelligence Unit) informed the ED and SEBI that when SEBI issued the first order restraining Sahara from taking any more investments, the group transferred approximately Rs 3,600 crore abroad without prior approval of the RBI. The EDs case on forex violation in this matter is finished and pending adjudication against Sahara and banks.
In one of the largest ever reporting of suspicious cash transactions, the FIU also told enforcement agencies last year that it had noticed substantial cash transactions in 4,753 additional bank accounts of firms owned by the Sahara group, maintained in 50 banks across 23 states.
The Sunday Express has accessed the FIU data that covers the period from May 2013 and talks about transactions ranging from Rs 25 lakh to Rs 50 crore. The FIU has shared this with the CBI, ED and SEBI. According to sources, the agencies are now trying to match FIU data with profiles of the 66-odd lakh investors in SIRECL.
THE PROPERTY QUESTIONS
After Sahara failed to convince the apex court that it had refunded Rs 24,000 crore to investors in August 2012, the court ordered SEBI to attach Saharas properties and asked the group to submit titles equivalent to Rs 24,000 crore. SEBI later said that the titles submitted were grossly overvalued.
In November 2012, SEBI filed a contempt petition against Sahara for not following the Supreme Court order.
On February 26, 2014, Roy missed a directive to appear before the court and, two days later, was held for contempt. The court has given Subrata Roy and Sahara time till March 11 to come up with a plan to refund investors, failing which his custody could be prolonged.
In a reply to The Sunday Express, the Sahara group said, The Supreme Court order dated 21.11.2013 states that Sahara Group of Companies shall not part with any movable and immovable properties. The order does not bind the group (from) carrying out normal business, and thousands of service centre/offices are carrying out ordinary course of business through current account as current accounts of the Sahara Group are not covered by the said order.