Sahara’s Mysterious Riches: Rs1,10,000 Crore Raised in 10 Years despite Intense Scrutiny of Government, Supreme Court and SEBI
On 18th August, the usually somnolent central registrar of cooperative societies (CRCS), which regulates cooperative societies and cooperative banks, did something that ought to have made banner headlines across the media. Vivek Aggarwal, joint secretary, cooperatives and central registrar wrote to the ministry of corporate affairs (MCA) that four multi-state cooperative societies of the controversial Sahara group had raised an astounding Rs86,673 crore over 10 years (from 2010) from several crore depositors and was unable to make repayments. Asking for an investigation by the Serious Frauds Investigation Office (SFIO), Mr Aggarwal says he has received at least 15,000 complaints in eight months and, after conducting hearings, has issued multiple orders against the four cooperative societies. (A copy of the letter is appended below).
 
The 4 Credit Cooperative Societies 
1. Sahara Credit Cooperative Society Ltd (Sahara Credit), registered in Lucknow, raised Rs47,245 crore from nearly 4 crore depositors and invested Rs28,170 crore in Aamby Valley Ltd. It operates in 22 Indian states. As far back as 9 December 2019, there were 208 complaints (of which only 12 were settled and 80 declared invalid) against it, seeking winding up and liquidation of the society. This was deferred on the basis of various commitments made by it, including submission of a quarterly statement to the regulator and settlement of all pending complaints. Sahara claimed it has an online redress mechanism (http://sccsl.sahara.in/contact.html) and contact address ([email protected] ) but an email sent to it bounced. 
 
 
2. Saharayn Universal Multipurpose Coop Society Ltd, (Saharayn Universal), registered in Bhopal in 2014 collected about Rs18,000 crore from its 3.71 crore members and invested Rs17,945 crore in Aamby Valley Ltd. It has operations in 17 states.
 
3. Humara India Credit Coop Society Ltd, (Humara India) has deposits of Rs12,958 crore from 1.8 crore members. It is registered in Kolkata and operates out of 15 states and Union Territories. Of this, Rs10,255 crore was invested in Aamby Valley. On 17thAugust, the CRCS said that its investments in Aamby Valley Limited were “against the basic principle of thrift and credit cooperative society” and need detailed investigation. 
 
4. Stars Multipurpose Cooperative Society (Stars), registered in Hyderabad, raised Rs8,470 crore from 37 lakh investors through 2018 branches in 14 states. Of this, it invested Rs6,273 crore in Aamby Valley Ltd as ‘equity’ in addition to advances of Rs1,800 crore. In August, a CRCS order noted that it was not able to provide details of advances of Rs1,800 crore given by the society and ordered it to stop collecting deposits. There were 6,720 complaints pending. 
 
The facts would suggest that the Sahara group is a giant money-raising machine that picked up Rs1,10,000 crore (including Rs24,000 crore explained below) without any help from investment bankers, no publicity and completely unaffected by a high-profile trial in the Supreme Court (SC) which led to group chairman Subrata Roy being sent to Tihar jail on 4 March 2014. He remained in jail until 6 May 2016, when he was released on parole for the last rites of his mother. The SC order was part of a long and bruising battle with the Securities and Exchange Board of India (SEBI) in connection with Rs24,000 crore raised by two Sahara realty entities by issuing optionally fully convertible debentures (OFCDs) without the SEBI’s permission. 
 
SC ordered Sahara to deposit the money it had raised with SEBI. Replying to a Lok Sabha question, minister of state for finance, Anurag Thakur, said that as on 1 February 2020, the Sahara group has deposited Rs15,448.67 crore to 'Sebi-Sahara Refund’ account and a cheque of Rs41.59 crore was paid in late-January 2020. SEBI had received 19,560 applications for refund representing an investment of just Rs81.3 crore. Of this, Rs109.86 crore was refunded to 14,146 applicants, including principal and interest, following several advertisements issued by the regulator.
 
Why was there a huge gap between the money raised and money claimed by depositors? Sahara has argued that 95% of the money it had raised was already paid back; but it has never been able to provide satisfactory evidence of any payment. Sahara has demanded the money back from the regulator, but this entire process is monitored by a court-appointed former Supreme Court judge.
 
Mr Aggarwal’s letter asking for an SFIO probe of the four societies was reported by the Indian Express and Press Trust of India (PTI) on 3rd September and published by newspapers across the country. These mind-boggling numbers ought to have made banner headlines at least in the business press and all our investigation agencies should have been taking up the issue. No such thing happened nor has an SFIO probe been ordered as requested.
 
Even stranger is the fact that Sahara has not been able to repay depositors since early-2020; but, despite the deleterious impact of COVID-19 on livelihoods, several crore investors, who apparently invested in its cooperative societies, have remained quiet, docile and largely invisible. There are no public protests, no court cases, except 15,000 investments into the CRCS and a sprinkling of complaints on public consumer redress forums. 
 
Since Mr Aggarwal’s letter is well reported, let us analyse some astounding details as well as the flurry of orders since December 2019, which are available on the MSCS (multi-state cooperative societies) website.
 
Mr Aggarwal’s letter says that the four credit cooperative societies, together, invested a massive Rs62,643 crore in Aamby Valley project. Sources dealing with the SEBI litigation say that Aamby Valley is, indeed, such a mess of multiple companies holding different parts of the picturesque hill station (with an international class golf course and air strip) that is hard to split it in parts and find a buyer, especially without the group’s cooperation. At one time, Sahara had submitted title deeds of properties to SEBI in lieu of cash, but they were returned due to serious complications with the title. 
 
At a hearing for Saharayn Universal in March, Mr Aggrawal refers to a letter by CRCS to the Reserve Bank of India (RBI) and the department of financial services (Union ministry of finance) asking about the legality of the cooperative society, collecting contributions from its members, as deposits. He notes that neither had responded until the hearing. RBI and the finance ministry don't seem to have responded.  
 
A startling observation from Mr Aggarwal is that Sahara Credit Cooperative made an advance of Rs2,253 crore to Subrata Roy which was transferred to SEBI as payment collected by one of the two Sahara realty companies. This raises several questions about Sahara’s claims about refunds and collections.
 
Thirdly, he says, ‘fictitious profits’ were shown in the accounts of the societies for sale and purchase of shares of Aamby Valley Limited among group companies. This is not even like a ponzi scheme which pays fancy returns to initial investors. In this case, investors, investments as well as returns that were generated, seem hazy. 
 
These cooperative societies also made investments in other Sahara group entities such as Sahara India Commercial Corporation Ltd, Sahara Prime City Ltd, Lucknow, Sahara Housing Projects, Sahara Hospitality, Sahara India Ltd, Sahara Financial Corporation Ltd, etc, writes Mr Aggarwal.
 
In July, the CRCS prohibited all four cooperative societies from taking any fresh deposits from their members.
 
 
The central registrar says that the deposits collected by the cooperative societies represents the hard-earned money of several crore Indians and these investments must be investigated and a proper valuation done of the assets. But think about it. While 15,000 complaints is significant, the total number of investors is allegedly 4 crore in just one cooperative society and, if there is no overlap, then the total depositors may be as high as 6 crore to 7 crore. Given that there are complaints about refunds since January this year, the silence and invisibility of Sahara’s investors is stunning. Even in the SEBI dispute, the total sum paid to nearly over 19,000 applicants was just Rs100 crore—a drop compared to the money raised. 
 
Although an email sent to the Sahara Multipurpose Cooperative Society bounced, we note through media reports that Sahara’s spokespersons had strongly denied any wrongdoing. The PTI report quotes the group making several claims. First, that they accept deposits/contributions only from their members who have voting rights in the society. We know from the CRCS orders that records establishing this for 4 crore members have not been provided. The Sahara group is understood to have submitted a legal opinion saying that credit cooperative societies do not come under the purview of The Banning of Unregulated Deposit Schemes Act, 2019 as claimed by the regulator. 
 
Former SEBI chairman UK Sinha, in his book, has written how several finance ministers and prime ministers (Pranab Mukherjee, Dr Manmohan Singh, P Chidambaram and Arun Jaitley) were fully supportive of SEBI’s battle with Sahara. If that is, indeed, the case, how was Sahara Parivar quietly able to raise Rs86,000 crore without a whisper in the public domain (in addition to Rs24,000 crore contested very publicly). During this time, the group was under the spotlight of the highest executive offices in the country, a key regulator and the Supreme Court and, Mr Roy was in jail for two of those eight years. We are truly a banana republic. 
 
 
 
 
 
Sahara investors, who want to be part of the joint action and effort by a SC lawyer to help, may please join Moneylife Foundation's Telegram group here: https://telegram.me/joinchat/OOrsZRMirh3vL9eKAHLJFA and share details.
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    COMMENTS

    ckramachandran

    4 weeks ago

    I am surprised to read in this report about UK Sinha stating that Pranab Mukherjee among others was supportive of SEBI . At least in the Sahara case the world knows how Mukherjee hounded out K M Abraham who as SEBI member ordered against Sahara and Roy. Abraham was charged with vigilance cases and his record as a clean officer was sought to be destroyed. He had to ultimately file a memorial with the prime minister. Maybe after UK Sinha took charge Mukherjee had a change of heart for reasons which can be guessed.

    rrgajjar547

    4 weeks ago

    I want to lodge a complaint for refund which was due in feb 2019 but till date no refund received.
    Any one can guide where to lodge a refund complaint?

    amanvermalr

    4 weeks ago

    Mr Aggarwal's letter is not clearly visible. Can you please reupload it or add a link to the letter.

    Jose Koshy

    4 weeks ago

    One of the reasons for No takers / claimants of the deposit are most depositors are Ghost / Benami for others and cannot show up the source of income. So Sahara asking it back ? They need to do a KYC on all the Customers and if they don't exist must be Confiscated & be the property of the government under the Benami act

    nileshprabhu

    4 weeks ago

    You do amazing work.

    Sudhir Mankodi

    4 weeks ago

    Suchetaji, this viscious circle of raising money and not paying it to the depositors will continue till our investors will not be fully educated on safety of their funds. if you do the back of the envelope calculation, average deposits per investor is hardly Rs.10,000/- This amount from individual perspective is very insignificant and the Sahara knows it very well that if they don\'t pay for a long period or even if they don\'t pay at all, not much hue and cry will be there by the depositors as the legal process is cumbersome, time consuming and costly. So, majority of the depositors will silently suffer and those who are capable of raising voice, will be first persuaded to re-invest in some other scheme thereby ensuring their own liquidity by NOT PAYING to the depositor as both will only be book entries! Unless some tough vrat comes, files a case and has the spine to pursue against the mighty vested interest group like Sahara, the woes of such depositors are unlikely to end.

    Ramesh Popat

    4 weeks ago

    Lakhs of Be-Sahara people , thanks to blind regulators!

    makwana34515

    4 weeks ago

    No many complaint anywhere beacause of most of depositor don't know how to file complaint and second things sahara group ltd provide false console to depositor if you convert your Q shop and another pending case scheme to another scheme you will get your money back if you don't convert them so sahara group ltd not responsible for your any mobey deposit in our scheme.even my father convert to another scheme so after sebi says we got only 19000 depositor complaint bcz of sahara group already convert these secheme to another sechem. So most of the people can't do any refund complaint if possible pls make any website, social media group or any form of online group so sahara group of all depositor send their any secheme receipt to the direct government sebi or court. Pls inform me if any kind of news regarding sebi or supreme court or sahara group

    surajthakur2009

    4 weeks ago

    I really don't understand, how they are left so easy by prosecuting public money. Am one of the victim waiting for my sahara Qshop policy returns.

    viratbharat1

    4 weeks ago

    My wife had invested rs 50000 via one of my relative who was agent in sahar india maghar sant kabir Nagar up in 2009, i also tried sahara for payment they told to reinvest it into another scheme i.e. q shop for even better returns when i denied they didn't sent details of my investment to sebi and after sending SEBI for payment SEBI denied that it is not appearing into our records as sent by 100s of trucks of garbage by sahara, i also complained to pm, central registrar , cm helpline, local police , hoping for refund .vinod tripathi 9336402005, owner of 2 sahara adobe bonds

    yerramr

    4 weeks ago

    This is a very commendable investigative story of money laundering. The investors and depositors should have formed an Association to fight for their investments with Sahara of various forms and hues. Strange is indeed their silent suffering!! All the rents from the Aamby Valley should have been collected by the RCS and put in a separate account for repaying to the depositors after producing the evidence of deposit and the property tax should have been also held in a separate account. The owners of flats in Aamby Valley should have definitely seen that they have a valid title before buying. All of them cannot be categorized under the gullible innocent investors in the property!!

    robertudipi

    4 weeks ago

    Sahara is never paid to the investors it’s still a big fraud by the company. Instead of paying on maturity they have forcibly transferred in another schemes . That is why company has no evidence of paid to the investor.

    REPLY

    u71938

    In Reply to robertudipi 4 weeks ago

    In that case, why investors have not come forward and complained?

    narayansa

    4 weeks ago

    `sahara entities could well be laundering black money using fictitious depositors. That could explain insignificant number of complainants compared to the humoungous amount of money raised. Clearly influential moneybags must be behind this enterprise.

    shetyerb

    4 weeks ago

    I feel that instead of the Simple Woman, this not so simple man should be made the Fiance Minister of India.

    s5rwav

    4 weeks ago

    White Crime Businessmen seem to have Full Support of the Supreme Court of India Judges. I am Babubhai Vaghela from Ahmedabad. Thanks.

    Yash Birla, 3 Others Barred from Securities Market
    The Securities and Exchange Board of India (SEBI) has barred four individuals, including Yashovardhan Birla, chairman of Yash Birla group, from the markets in relation to manipulation in issuance of global depository receipts (GDR) by Birla Cotsyn (India) Ltd way back in 2010.
     
    Birla Cotsyn (India) Ltd (BCIL) is currently undergoing liquidation proceedings under the Insolvency and Bankruptcy Code (IBC).
     
    The other individuals barred from the securities market are PVR Murthy, YP Trivedi and Mohandas Adige.
     
    SEBI had sent a show-cause notice to the four of them and BCIL, alleging that BCIL issued 9.69 million GDRs, amounting to $24.99 million on 15 March 2010, equivalent to 96.89 crore equity shares of Re1 each and Vintag FZE was the only entity to have subscribed to them and the subscription amount was paid by obtaining a loan from EURAM Bank.
     
    Further, the regulator said the pledge agreement was signed by Mr Murthy, then a director of BCIL, who was authorised by a board resolution in December 2009. The company had also approved opening of a bank account with EURAM Bank for the purpose of receiving the GDR proceeds.
     
    Birla, Trivedi and Adige had also attended that board meeting, as per the regulator.
     
    SEBI restrained Yashovardhan Birla from accessing the securities market and further prohibited from buying, selling or otherwise dealing in securities, including units of mutual funds, directly or indirectly, or being associated with the securities market in any manner, whatsoever, for a period of two years from the date of this order.
     
    "During the period of restraint, the existing holding of securities including units of mutual funds of the said Noticee shall also remain frozen," the order said.
     
    Last year, UCO Bank declared Yashovardhan Birla, also the director of Birla Surya Ltd, as a wilful defaulter after the company failed to repay loans of Rs67.65 crore.
     
    Mr Murthy has been barred for three years while YP Trivedi and Mohandas Adige have been restrained for a year.
     
    Senior advocate Trivedi, a former member of Parliament (MP) is also independent director of Reliance Industries Ltd (RIL). In 2005, he along with MP Modi and DV Kapur was part of RIL's board panel for suggesting suitable scheme for re-organisation after the pact reached between Mukesh Ambani and his brother Anil.
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    COMMENTS

    sathesunil503

    3 weeks ago

    Franklin Templeton Mutual Fund Entire Director board members should be penalized under Economic offenses EOW

    Ramesh Popat

    4 weeks ago

    crooks are atmnirbhar and in high demand! jai ho!

    Put RBI under Prompt Corrective Action for Effective Sectoral Control, Says AIBEA Leader Venkatachalam
    With bank after bank in the private sector getting into problems, the latest being the Lakshmi Vilas Bank (LVB), the efficacy of Reserve Bank of India (RBI) as the sectoral regulator will soon be a question mark, said a top leader of a large bank union.
     
    "The way things are coming out in private sector banks, RBI is not able to control or unwittingly becomes a party to it, its efficacy will soon be a question mark," CH Venkatachalam, general secretary, All India Bank Employees' Association (AIBEA) told IANS.
     
    "It is time the central government thinks of putting RBI under Prompt Corrective Action to really make an effective tool to control Banks," he added.
     
    Citing the happenings in the 93-year old LVB, Mr Venkatachalam said its bad loans leapt from just about 2% in 2017 to 25% in 2020.
     
    "The fact that the Bank was going in the wrong way could be visible even to a layman. How all these things and deteriorating health of the Bank was not seriously taken note of by RBI and its nominee Director," Mr Venkatachalam wondered.
     
    He said, the RBI has access to everything going on in every bank and under its very nose, many things are happening in many banks.
     
    "Not long ago, one RBI nominee director used to raise questions on the happenings in the bank. But later the RBI nominee directors remained silent," R Subramanian, former general secretary of the Lakshmi Vilas Bank Officers' Association and who retired from the Bank as senior manager told IANS.
     
    He has moved the Madras High Court to direct the Central government, RBI and the Securities and Exchange Board of India (SEBI) to suspend LVB's board and appoint an administrator.
     
    "Strangely, the nominees of the RBI on the LVB Board have not raised any concern or red flag despite the happenings in the Bank," Mr Subramanian, 67, told IANS.
     
    In his petition, Mr Subramanian, who was the general secretary of the Lakshmi Vilas Bank Officers' Association, and retired from the Bank in 2013 as a senior manager, said that he had sent a representation to the Centre, and the RBI, "bringing to their notice the mismanagement and misleading disclosures to the general public for taking appropriate action but these have not been considered."
     
    He contended that the mismanagement has resulted in gross non-performing assets (NPA) leaping from 2.67% in 2017 to 15.30% in 2019 and stretching to 25.39% in March 2020.
     
    "Any such increase in gross NPA could not be justified as a common occurrence in the banking industry. This evidences quick mortality of advances and the options of the bank made against the guidelines of the RBI and the SEBI," Mr Subramanian argued.
     
    "I submit that the total deposits in the respondent bank, as on 31 March 2020, are Rs21,443 crore. But there is no safety for the deposits made by general public as per the information available in the public domain and qualified statements of the statutory auditors of the bank in the balance sheet," he said.
     
    Mr Subramanian said the unions have brought the happenings in the bank to RBI earlier, but nothing happened.
     
    In his petition Mr Subramanian said the loss to the bank is due to bad advances extended Religare, Star agri, products, Talwalker,ACox and Kings, Coffee Day amounting to about Rs1,200 crore violating corporate governance.
     
    LVB had extended big advances to Religare, Jet Airways Group, Cox and Kings, Nirav Modi Group, Coffee Day (relate to the questionable agri loans extended violating the established norms and RBI guidelines) and others to the tune of about Rs2,000 crore, he said.
     
    Mr Subramanian also said in his petition that the Bank did not curtail its expenditure.
     
    "RBI did not know how Nirav Modi could play with the Banks.A RBI did not know how Vijay Mallya was playing with the banks. RBI did not know the affairs of YES Bank. RBI did not notice anything wrong when Dhanlaxmi Bank was not doing well.A RBI did not notice anything wrong when Global Trust Bank was doing so many unscrupulous things and which were brought to their notice by RBI auditors themselves," Mr Venkatachalam said.
     
    "In the same way, RBI does not appear to be knowing what is happening in LVB. If they really did not know what was happening in all these Banks, then it is not the RBI it was meant to be. If they knew all these things and still did not take drastic and timely steps, then RBI has no meaning," Mr Venkatachalam added.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    User 

    COMMENTS

    Meenal Mamdani

    4 weeks ago

    It is obvious for some time to even casual observers like myself that RBI does not have the capability to monitor and correct all that is going wrong in the banking sector.

    RBI was formed at a time when the Indian banking system was young, very small and finding its feet. The earlier RBI directors did the best they could but it clearly was not enough.

    Unfortunately things came to a boil during the tenure of a govt led by a man who did not believe in asking for or taking advice from experts but rather wanted to trust his own "gut instincts". When that went wrong, he did not have the courage to admit his mistakes. He is now trying to put his yes-men/women in important positions who will automatically say "Jee Huzoor" to his diktats.

    India deserves better than this.

    ssbh.dceo

    4 weeks ago

    CALL WORLD BANK OFFICIALS TO CARRY ON!

    REPLY

    saioamshyd

    In Reply to ssbh.dceo 4 weeks ago

    World Bank can't do anything in internal affairs of India & its economy.

    saioamshyd

    4 weeks ago

    https://www.moneylife.in/article/put-rbi-under-prompt-corrective-action-for-effective-sectoral-control-says-aibea-leader-venkatachalam/61678.html
    1. The LVB & DLB episodes speak of tip of iceberg looming in Indian Banking Industry.
    2. The true allegations of GS, AIBEA, & LVB FUNCTIONARIES deserve immediate attention of RBI.
    3. The UFM is a novice to Economy & the functionaries in DFS[UFM], IBA are Duds of Adhocism.
    REMEDIES-
    [i]. Smt.Nirmala Sitharaman, UFM is too busy to reply former PM, the genius PM, DR.Manmohan Singh & depended upon her bureaucracy. Affixed her signature, being novice to Indian Economy, IS A NATURAL BLUNDER. Her talent can be ushered in other Ministries. Piyush Goel Jee with CA back-ground, did well as interim FM in the absence of Arun Jaitley Jee.
    [ii]. In order to goad the outdated, demented Duds of Adhocism, PMO/UFM can be filled –up with young + committed blood. Infusing Ms.Amrapali, IAS, former Dist. Collector/ Magistrate in Warangal [TS] at the instance of G.KishanReddy Jee, UHM of State, GOI; it is a right step.
    4. https://www.youtube.com/watch?v=4Si8U02s8cQ.
    5. SATYAMAEVA JAYATHE!!!

    s5rwav

    4 weeks ago

    Dear Mr #SABobde the Chief Justice of India, Why Not Order the #TotallyCorrupted RBI Governor Mr #ShaktikantaDas and his Deputy Governors to be Publicly Hanged at the Entrance of Supreme Court of India for Continuing Rampant Corruption in the Banks of India? I am Babubhai Vaghela from Ahmedabad. Thanks.....

    REPLY

    saioamshyd

    In Reply to s5rwav 4 weeks ago

    GM Babubhai Vaghale Ji! If your extempore reaction is implemented, it leads to chaos. Please, share your reaction on FB,Twitter & linked.in for PMO to act properly.

    We are listening!

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