What happened at Sahara?

The Sahara scam - an Insight

On 28 February 2014 the electronic and print media were abuzz with the news of India’s one of the most talked about businessman Subrato Roy Sahara’s arrest after the Supreme Court order. The whole story refers to Sahara’s innocuous means of raising funds and the SEBI nab on the same. But where did it all start from?

Well to know this we have to go back to September 30, 2009 when Sahara prime city, a real estate venture of the Sahara group filed a red Herring Prospectus (RHP) with the SEBI to invite an IPO for the company. Here one needs to know that SEBI- Securities Exchange Board of India is the regulator of share market and RHP is the initial document that a company files with SEBI to invite IPO. When the SEBI studied the RHP, it noticed that SAHARA Company has raised heavy funds from two of its firms- Sahara India Real Estate Corp Ltd and Sahara Housing Investment Corp Ltd. In the midst of this study, SEBI received 2complaints which indicted Sahara group for using illegal methods to raise money from public by issuing Optional Fully convertible Debentures (OFCDs)-a type of bond.

When SEBI investigated the funding, it found that these bonds were raised from the public after filing the RHP with the registrar of Companies (ROC) whereas for funding from more than 50 investors, the permission is to be sought by the SEBI. The SEBI ordered the two companies to return the money to the investors because of the alleged anomalies in the process.

Hereon, the story becomes even more interesting. The Sahara group filed an appeal in the Supreme Court against SEBI order but the SC in turn ordered the Sahara group to deposit the whole sum of 25,781 crore with the SEBI in 3 installments. The first installment of Rs. 5120 crore was paid by the group but it could not pay back the other two installments in due time. Instead, Sahara claimed that it has paid the remaining 20,000 crore directly to the investors. The documents produced before the SEBI by the group were found to have certain discrepancies. The SEBI smelled that the investors to whom the money was paid were fraud and fictitious. The court gave summons to Sahara Chief Subroto Roy and later issued warrant against him. Yesterday, he was under police custody.

This whole story of Sahara scam draws light on the importance of independent agencies who could investigate without any political pressure like SEBI or the Supreme Court. The most absurd part of the Sahara scam is that payment to the tune of 20,000 crore were made to the investors without selling any property of the group. Well, now the matter is subjudice and the court will decide on the whole story.