Sahara Case: Can the Govt use Benami Act, PMLA as investors are not forthcoming?
It has been almost six years since a landmark Supreme Court order in 2012 asking Sahara Pariwar to refund over Rs24,000 crore to investors of its twin realty companies. And yet, the market regulator Securities and Exchange Board of India (SEBI) is unable to find the 3.3 crore investors or bond holders claimed by the Sahara Group.
This is no surprise to us. Way back in October 2011, even before the Supreme Court judgement, we had written a piece headlined, “Sahara India: Ghost Investors
” We had pointed out that just one of these two companies, a fledgling enterprise, had claimed in a court affidavit to have raised Rs19,000 crore from 22 million investors. This, we pointed out, would mean that “Sahara's investor base, in just one company, is nearly thrice India's total investor population which was put at eight million by the D Swarup Committee in 2010 (including mutual fund investors). Yet, as we have often said, Sahara has the most faceless and docile bunch of investors in the country". Moreover, we said, it was hard to come across a Sahara investor. If there were any, they were faceless, docile and unconcerned about the upheavals in the company. This begs the obvious question - are there any real investors? And, if not, where did the money come from?
SEBI has reportedly managed to refund just Rs85.03 crore to investors from the Rs11,798 crore deposited by Sahara group after an advertising and publicity effort. So why is the government not initiating action under the Prevention of Money Laundering Act (PMLA) or the recently enacted Benami Transactions (Prohibition) Amendment Act to track the source of the money?
In a historic judgement, on 31 August 2012, the Supreme Court
directed the Subrata Roy-led Sahara Group to deposit Rs24,000 crore with SEBI so that the money can be refunded to investors. However, the apex court had doubts about whether Sahara's investors are fictitious. "If, after the verification of the details furnished, it is unable to find out the whereabouts of all or any of the subscribers, then the amount collected from such subscribers will be appropriated to the Government of India," the SC said in its order.
The Benami Act that came into effect from 1 November 2016 gives the government powers to confiscate benami properties/assets held in the name of another person or under a fictitious name to avoid taxation and conceal unaccounted for wealth. It also states that properties held benami are liable to confiscation by the government without payment of compensation. The term property under the Act covers movable, immovable, tangible and intangible properties.
What is important is that the Sahara Group may deposit the entire dues in the SEBI-Sahara account and then reclaim it back since there are hardly any investors coming forward seeking refunds. Before such a situation arises, it would be imperative that the government steps in and applies the Benami Act against Sahara.
During the hearing in February 2017, one of the points raised by Sahara Counsel Kapil Sibal was on similar lines. The Special Bench of Justices Dipak Misra, Ranjan Gogoi and AK Sikri, repeatedly asked Sahara to file a list of encumbered properties that can be put up for auction so that it can see how much of the Rs14,000 crore needs to be paid to all and sundry depositors.
Responding to this, Mr Sibal claimed that 85% of the investors have been paid. "So once Rs14,000 crore is got from the auction and put in the Sahara-SEBI account... Who will the money be paid to?" Mr Sibal was quoted in a report from The Hindu
Late, on 17 April 2017, the SC asked the Official Liquidator of Bombay HC to auction Sahara's Aamby Valley property, which is worth over Rs34,000 crore.
Vinod Sharma, official liquidator of the Bombay High Court, told the apex court that terms and conditions for the auction of the Pune-based Aamby Valley project had been filed.
Sahara do have several other properties spread across the country and some overseas.
Last year in September, SEBI had told the Supreme Court that no useful purpose would be served by proceeding with the auction of Sahara properties in the second phase as most of them were in provisional attachment of the Income Tax department.
In November 2014, the Enforcement Directorate (ED) had registered a money laundering case against Sahara group. Earlier, in March that year, writing in his column in Business Standard, Somasekhar Sundaresan
partner of JSA, Advocates & Solicitors, had said, "...Sahara is just unable to demonstrate who the investors are, where they live, and how they have been repaid. In short, it is quite evident to anyone following the case, that in all likelihood, the investors do not exist. Now, that changes not just the shade or complexion of the case, but even the very basic colour of elements involved. If the investors do not exist, it would point to the inference that the tens of thousands of crores of money in the balance sheets and bank accounts of the Sahara companies are from sources that cannot even be demonstrated. If that were true, it would mean that fantastic amounts of cash are converted into bank balances. In the eyes of law, it would be a case of alleged money laundering."
According to a report from Livemint
till date, Sahara has deposited Rs11,798 crore, which has grown to Rs14,487 crore on account of interest, with the regulator.
"And till 31st March, SEBI has managed to return only Rs85.03 crore to investors, according to two people who have seen the annual accounts tabled by the regulator at its board meeting on 21st June. The number is believable because SEBI's annual report for 2015-16 said it had refunded Rs55.72 crore; and its annual report for 2014-15, Rs42 crore. And so, for another year, SEBI's quest for Sahara's elusive investors has remained unsuccessful. This, despite efforts by the regulator, including ads in newspapers, to find them," the report says.
Quoting a person familiar with the matter, the newspaper says, "In 2013, a team of SEBI officials were sent to the north and north-eastern parts of the country to find the bondholders and request them to file refund claims."
The Sahara Group has maintained that it has refunded 95% of the bondholders.
In April, the Group gave an assurance to the apex court that it would deposit Rs1,500 crore by 15 June 2017 in the SEBI-Sahara account to keep Mr Roy out of custody. On 19th June, the SC granted an extension till 4th July to Sahara to deposit the balance Rs709.82 crore. During that hearing, the Court was informed by Sahara's Counsel Mr Sibal that the group had sold its London-based hotel Grosvenor House to GH Equity UK Ltd for 575 million pounds (around Rs4,715 crore).
Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Finance Corp Ltd (SHFCL) were asked in 2012 to pay Rs17,600 crore with 15% interest to 3.3 crore investors from whom it had raised through optionally fully convertible debentures (OFCDs) in 2008 and 2009.