Annually there are so many cooperate and financial scandals in the whole world. Sahara Scam is one living example of one of the biggest cooperate scams in Indian history. India faced so many scandals after Independence, but this scandal has shaken up the root of Indian cooperates and financial legitimacy.
Source:- https://choiceindia.com/blog/the-brainchild-of-sahara-india-pariwar-the-honourable-saharashris-companies-systematically-violated-laws/
What is Sahara India Pariwar?
Sahara India Pariwar is an Indian private-owned conglomerate.
which was founded by Subrata Roy in Gorakhpur in 1978. His primary areas of commercial interest are finance, media and entertainment, construction and residential, consumer items, information technology, etc. The group was a major promoter of the Indian National Cricket Team, Force India Formula One Team, Indian National Hockey Team and many other sports. It employs more than 12 lakh employees and came Second as the largest employer in India after Indian Railways.
Sahara Scam
The issue initially surfaced when Indore-based accountant Roshan Lal wrote to the National Housing Bank (NHB) asking it to investigate discrepancies in housing bonds issued by two group companies. Sahara India Real Estate Corporation (SIREC) issued. and Sahara Housing Investment Corporation (SHIC), both headquartered in Lucknow. Subrata Roy noted that the bonds were not issued under the new demand.
Lacking the authority to pursue the matter, NHB referred the complaint to SEBI. Capital markets regulator SEBI has reviewed the red herring draft prospectus that the two companies have prepared. The two companies are preparing to use the IPO to raise funds for the real estate company Sahara Prime City Limited. A similar letter was also sent to SEBI by the Investor Protection Professional Group, a group of lawyers with an office in Ahmadabad.
In the investigation initiated by SEBI after reading the complaint, it was found that two companies SIREC and SHIC had increased their capital reserves to Rs. 4,000 and Rs. 32,300 crores respectively in the previous 4 years without anyone being held responsible. responsibility. The companies were given show cause notices, but they were unable to protect this cash flow. According to their prospectuses, both companies used Optionally Fully Convertible Debentures (OFCD) to raise significant amounts of money from the public.
According to the law, there are two ways to raise capital in the market and for each of them, two different types of markets have been developed: primary market and secondary market. Public issues, rights issues, private placements, venture capital, bonds issued by financial institutions and similar techniques are examples of primary market vehicles. Securities issued on the primary market are traded on the secondary market. It was these investors who traded financial assets on the fictitious stock market that created it. Although it operates as a public company, Sahara's prospectus indicates that the company is private.
Source:- https://en.wikipedia.org/wiki/Sahara_India_Pariwar
The red herring prospectus for the over 934-page bond issue was registered by Sahara Prime City, a Sahara India Pariwar Group company. Tax disputes between the company and the Income Tax Department regarding the issuance of OFCD for Rs. 34 crores have been revealed. Additionally, from 25 April 2008 to 13 April 2011, the company issued OFCDs to raise money, which went against what was stated in the company's prospectus.
The company also launched its Initial Public Offering (IPO). During this period, the company has accumulated a total revenue of Rs. 17,656 crores. About 30 million people helped raise funds. Furthermore, he neglected to inform SEBI, the agency responsible for regulating the market. The company's liability increased to Rs. 20,000 Crore by the end of 2009.
The Reserve Bank of India ordered the company to initiate liquidation proceedings and barred it from issuing any further bonds. This is where the problem starts. In short, the company was accused of financial fraud and money laundering.
Legal Battle Against Subrata Roy
SEBI ordered Subrata Roy to refund the full money to the investor with an interest rate of 15% with a deadline of three months in the three instalments but they failed to pay out.
They paid only the first instalment of Rs. 5120 crores and did not pay the other two instalments by saying that all other investors had been already repaid by them.
Only 4600 of the estimated 2-5 million investors showed up to claim their funds. On 26 February 2014, the Supreme Court ordered the detention of Subrata Roy, the head of the Sahara Group. In November 2017, the Enforcement Directorate charged Sahara Group with money laundering.
Money Laundering Charge
To slow down the process of the SEBI investigation Sahara Group sent 170 trucks of reports of investor information. Due to SEBI's dedication, they concluded that investor information was false, and money was not deposited by Sahara Group in investor accounts.
Apex instructed Sahara to pay in three instalments. Subrata Roy did not pay the other two deposits and only paid the first Rs 5120 crore. Subrata Roy claimed that he had already given the money to investors.
Although Subrata Roy claimed he had already made payments, only about 4,600 investors came forward saying he had not received their funds. The court then requested evidence and information regarding the source of the funds for the restitution.
The Sahara Scam serves as a sobering warning of the perils of unrestrained greed, corruption, and the seduction of power. It highlighted the vulnerability of common people who put their assets in the hands of financial institutions, and it showed the regulatory flaws that allowed such a massive swindle to continue for years.
The Sahara Scam has left lasting effects, notwithstanding the ongoing legal dispute. It is a lesson that regulators and governing bodies should learn to tighten supervision and defend the interests of investors everywhere. The fact that so many victims are still fighting for justice and the possibility of a better financial future is also a monument to the human spirit's tenacity.
Article By- Nitin Gupta
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