The rate of interest has been reduced on housing loan from 11% to 10.50% up to Rs30 lakh, and above Rs30 lakh from 11.25% to 10.75%
The global monetary easing has created a strong uptrend. However, if the Nifty closes below 5,410, the uptrend will be in doubt
Sahara India Real Estate, one of the two Sahara companies ordered by the SC to return investor's money, used a 'death risk cover' as a smart lure. We discover that this is another dodgy area with absolutely no information available about the insurer, the legitimacy of the death risk cover and the amount of premium paid by Sahara
Sahara India Real Estate Corporation (SIREC) has been selling Optionally Fully Convertible Debentures (OFCD) under catchy names like Nirman Bonds, Real Esate Bonds and Abode Bonds to raise tens of thousand crore rupees without bothering with proper regulatory clearance. An added attraction in selling the bonds was the “death risk cover” for all the first two—Nirman and Real Estate bonds.
But as Moneylife has always pointed out, an insurance cover is good only if you can make a successful claim and that will happen when the insurer is legitimate and has all the regulatory clearances.
Documents available with Moneylife show that the death risk cover is probably another dodgy chapter in Sahara’s operations with very little information available or revealed. Documents submitted by the company in the course of its long legal battle include sworn affidavits which say that the entity collected Rs17,600 plus crores after over 11.77 lakh investors had made premature redemptions. Investors had to make a minimum investment of Rs12,000 for two Real Estate Bonds, which could be done in installments of Rs200 each. The Nirman Bonds had no facility to pay in installments. The company claimed 1.36 crore persons had invested in the Real Estate Bonds after eliminating premature redemptions and 14.11 lakh persons had invested in Nirman Bonds. So much was the insurance cover on these bonds? What was the premium collected? There is surprisingly no information. In one affidavit, Sahara says that the number of persons who claimed would be provided if the appellate tribunal required this information.
The bigger question is, who got this seemingly lucrative insurance business? It is another mystery. For starters the two Saharas (as the Supreme Court referred to them) had no infrastructure of their own. They had a “written arrangement with M/s Sahara India—a registered partnership firm of the promoters” for “taking the premises and utilising other related infrastucture and facilities including manpower, bank accounts maintained at each of the branches owned by the said firm throughout the country for a composite rent consideration agreed to between the company and the said firm”.
Translated into simple English, it means that not only was an astonishing Rs17,600 crore collected from crores of persons, but a partnership firm of the promoters was banking all the money and providing the manpower. The persons who canvassed the loans—apparently 10 lakh of them—were called “freelance workers”, which means they would have zero accountability to the Sahara group or to the investors. Sahara India of course claims that it has a list of these freelance workers and they are associated with its other group businesses. At the same time, it also says that these ‘introducers’ were “not on pay-roll but remunerated”. They entered the collections in “Day Books” like it was small piggy-bank change and deposited it in Sahara India accounts.
At a time when the capital market regulator and insurance regulator are working at new ways to make distributors and agents accountable, it is astonishing that a company collected such vast sums of money without bothering with any regulation and the topmost lawyers in India fought hard to establish the legitimacy of its actions.
Now let us look at the so-called insurance. An affidavit by the company says, “Each investor in Nirman Bonds and Real Estate Bonds were provided “death-risk cover”. Up to February 2010, the cover was provided through a group insurance policy taken out by Sahara India Life Insurance Corp at the instance and cost of the Appellant No. 1 (Sahara India Real Estate Corporation Limited & Ors) company. We wrote to Sahara India as well as the Insurance Regulatory Development Authority (IRDA) to ask about the size and structure of this group cover and the amount collected, but we have received no reply. In fact, the insurance regulator probably does not even know about the cover and it is unclear if Sahara India Life Insurance obtained permission to offer it. This scheme too seems to have come to an end at the end of February 2010. Was it because it was not legitimate? We don’t know.
The affidavit says, “From 1 March 2010 “death risk cover” for each investor was, however, undertaken directly by the Appellant No. 1 (Sahara India Real Estate Corporation Limited & others) . On the basis payments have been made to nominees of the deceased investors, whose names and details can be provided, if required, by this Hon’ble Tribunal.”What exactly does this mean? SIREC is not an insurance company, so how can it offer this risk cover? How much of money was raised under the Nirman and Real Estate Bonds after 1 March 2010?
The death risk cover ostensibly provided on the Nirman and Real Estate Bonds obviously raise plenty of questions, but now that the Supreme Court has ordered redemption within three months, it remains to be seen if the insurance regulator follows this up. After all, Sahara India Life Insurance is a regulated entity, which used to captivate people with its catchy advertisements. Also, the regulator needs to investigate, if only as a detterant to many other companies that have been fabricating shady bonds and trying to follow in Sahara’s footsteps.