The Supreme Court's ruling on Sahara India was path-breaking but can Sebi drive home the advantage?
The Supreme Court's ruling on Sahara India was path-breaking but can Sebi drive home the advantage?
When the financial conglomerate of Chain Roop Bhansali (CRB) collapsed like a pack of cards in the mid-1990s, many of us, journalists, were fully aware of how dodgy the group was, but it was difficult to pinpoint exactly why it would collapse. The one time I had something concrete was a SEBI (Securities & Exchange Board of India) inspection report punching holes in its mutual fund operations. When I asked for his comment, Mr Bhansali went straight to the chairman of the media group I worked for and almost succeeded in having the report killed. Fortunately, I managed to convince him to let me publish that report, but without my name on it.
A few months later, CRB collapsed and rumour has it that the paper I worked for also lost a good deal of money. CRB’s agents around the country flocked to Mumbai to get their money back. Many were feeling wretched about having persuaded needy pensioners and widows to invest in CRB. When a group of them met me for help, I was initially unsympathetic. How could they not know that the group was dubious, I asked. A distributor from Kolhapur had an eye-opening response. He said, “Maybe you journalists knew about CRB, but nothing negative was ever published. I can only rely on public information and all that was positive. CRB had an AAA credit rating, a provisional banking licence (which RBI claims to approve after plenty of due diligence), was allowed to float a mutual fund (again after a tough approval process), had won a ‘best merchant banker’ award. The promoter routinely had his photographs published with regulators, politicians, policy-makers and others. Why would I even doubt its credentials?” He was perfectly right. CRB investors were victims not of a rogue company but of failed regulators and silent media.
It is in this context that the Supreme Court’s 263-page landmark judgement on the Sahara group’s privately placed debentures case is significant. By documenting every dodgy aspect of the group’s fund-raising exercise, Justices KS Radhakrishnan and Jagdish Singh Khehar have opened the doors to a frank discussion on the lack of credibility about its claims, absence of identification details of investors, constant obfuscation, reluctance to provide data and exercising influence in extracting false affidavits from government officials such as the Registrar of Companies (ROC), Kanpur. The judgement has reaffirmed the faith in the judiciary; and the legal team, led by senior counsel Arvind Datar, which fought doggedly against a battery of top lawyers, deserves a salute.
Let me explain what I mean. In a cricket-crazy nation, our cricketing heroes have had the Sahara Pariwar logo emblazoned on their shirts for nearly two decades. The contract seems to require our cricketers to endorse several Sahara projects giving it stupendous credibility among the masses. Its foray into retailing even has a bizarre depiction of Sachin Tendulkar and other cricketers performing funeral rites for products. Add to this, the frequent photographs of promoter Subrata Roy and his family with film-stars and politicians and the ‘unbanked’ public (which Sahara admits is its target audience) is sold. The final touch is the swishy lifestyle of Subrata Roy and media reports about his acquisition of iconic global hotels or bailing out Vijay Mallya’s sinking Force1. Who can suspect anything is wrong anywhere? But is this all a cover for a massive Ponzi operation? The strictness of the SC judgement seems aimed at clearing doubts, one way or another.
Regulatory Inaction
Until SEBI acted on Roshan Lal’s complaint to go after Sahara’s humongous, non-transparent fund-raising, every regulator had fallen silent after a cursory investigation. Court documents show that the massive Rs17,400 crore raised by Sahara India Real Estate Corporation and Sahara Housing Investment Corporation (Saharas) was coolly being funnelled into M/s Sahara India—a registered partnership firm of the promoters. Did our tax sleuths investigate how this large sum was deployed? Isn’t it curious that the Sahara Pariwar does not figure among India’s highest taxpayers, but its advertisement titled “Emotionally Speaking” claims that the Income Tax department is holding back a massive Rs2,000 crore in refunds? Is this even true?
A few years ago, the Reserve Bank of India (RBI) had halted Sahara’s fund-raising exercise but its half-hearted action didn’t go beyond ordering a refund of money raised through its residuary non-banking finance company. In fact, when we repeatedly asked RBI about Sahara’s brazen advertisements offering to repay a massive Rs73,000 crore (see picture) four months ahead of schedule, RBI did not respond.
Why don’t government watchdogs bark about Sahara? This too came out in the litigation, in a very positive way. A strong affidavit by Sanjay Shorey, joint director in the ministry of corporate affairs (MCA), exposed how Sahara had been manipulating the ROC, Kanpur, to back its dubious claims through sworn affidavits before the Allahabad high court. MCA’s affidavit, which Arvind Datar considers a turning point in the case, backed SEBI’s action to the hilt and strongly refuted its own ROC’s claims.
Silencing the Media
With the media spewing information about bigger scams (coal, iron ore, telecom) everyday, it seems contradictory to say that they are reticent about Sahara. So how does one explain the fact that no television channel debated the path-breaking SC judgement? Sahara’s belligerent full-page advertisements in the press and lavish commercials are a large enough source of revenue to silence many media houses. The galaxy of top lawyers hired to defend its bizarre claims and audacious obfuscation even before the apex court and limitless funds for litigation are other deterrents. That is probably why mainstream media have never questioned Sahara’s endless money supply. Popular rumour has it that Sahara invests politicians’ slush money. It is a myth that the group is probably happy to perpetuate (despite protestations in its advertisement), just as the late Harshad Mehta was happy to let people believe that he has access to political funds and Dawood Ibrahim’s investments before the securities scam of 1992 burst the stock bubble he had created. It covered up the fact that he had a fat fund-pipe directly into State Bank of India.
The SC verdict, which includes supervision by a retired judge, is watertight enough for SEBI to demystify the entire Sahara group. But it all depends on whether SEBI is able to use the leeway granted by the Supreme Court to remain two jumps ahead of Sahara’s many games and tricks that are already evident. First, it claimed that tens of thousands of people flocking to its headquarters in Kanpur to inquire about redemptions would lead to a law and order problem. It probably realised that this lie was easily verifiable. Next, SEBI’s investor helpline was inundated with calls and, finally, truckloads of ostensible data were sent to SEBI Bhavan in Mumbai without warning. How is it that Sahara was sending a password-protected compact disc until it lost the case and is now flooding the regulator with paper documents? Has Sahara found time to copy all the documents? Or could it be working towards a situation where it claims a loss-in-transit or finds a way to blame SEBI?
Despite the landmark Supreme Court judgement, the battle of wits between SEBI and Sahara is far from over. On the contrary, Sahara can continue to raise funds through the Sahara Credit Cooperative Society without a problem—after all, not a single political party has expressed the slightest concern about Sahara’s fund-raising, despite the shadowy operations and dubious record-keeping confirmed by the apex court.
Sucheta Dalal is the managing editor of Moneylife. Subscribers get free help in resolving their problems with select providers of financial services. She can be reached at [email protected]
dipti sadana
1 decade ago
Being an investor myself, I can relate to the fears and uncertainties of people in times like these. But,
with a company like “Sahara”, these fears seem irrational. They have stood strong for the past 33 years,and braved the storms of resentment and injustice. I see the current situation also as a malicious intent to destabilize the image and position of the company. I would request all my fellow investors to support Sahara, in these turbulent times and have patience and faith in this company.
Vikas Gupta
Replied to dipti sadana comment 1 decade ago
I don't agree with u at all. Sahara is a totally manupulative company & is Not investor friendly at all.
pradeep nambiar
1 decade ago
Sahara has been mysteriously collecting funds from investors since 30 odd years. SEBI, RBI, MCA and now the Supreme Court has called its mobilization illegal.Any lessor company would have been shut down by the Police and their Directors arrested under "Prize chit Money circulation banning act" like it was done in case of "RMP" where Chandan brothers were picked up from their office in Chennai without default. Nmart directors arrested "no default" even when the company had more than 150 malls. In the Nmart case their CMD Gopal Shekhawat was picked up from Surat when his family was undergoing check up and mauled like a petty criminal by the Andhra Pradesh police. Here Sahara has a Supreme court order against them, RBI in a Public Notice has warned investors against investing in them, SEBI has issued Public Notice, ROC-Ministry of Corporate affairs in the Court said it was a fraud. Even then none of their Directors are arrested. In SIREC and SIHCL case the Presiding officer of SAT was shocked that Mr Subrato Roy nor his sons are Directors in their own Company. Mr Subrato roy was a promoter who authorised collection of 40,000 crores but not the Director because being a Director he would be criminally liable. Great Ponzi operators across the world are in Jail. Bernie Madoff was turned on to US authorities by his own family so that only he is arrested and the family let off. Same thing happened to Allan Stanford they all serve Jail sentences to the tune of over 80 years. All eyes are on Sahara Parivar and "Sahara Shri"
suresh kumar gupta
1 decade ago
Dear Suchetaji
suresh kumar gupta
1 decade ago
Sucheta, you're the best. You're one of the few Indian journalists who deserve to be called a JOURNALIST. The rest are just talking heads chasing TRP's.

Jiyo Sucheta jiyo... aap ko hamaari umr lag jaaye!
Sucheta Dalal
Replied to Karma comment 1 decade ago
Many thanks. It is very kind of you to be so encouraging.
suresh kumar gupta
1 decade ago
Dear sir
your observation is correct. before my termination company has not give me a proper chance to defend me.i am submitting my reply as your pointwise as below.
a) my agency code is 00041214
b) the previous operation officer has blame me as(ki mene uski gardan pakdi. parntu jahan voh bethta hai vah tak mera hath hi nahi pahunch sakta to me uski gardan kaise pakad sakta hun, pl visit personally BALOTRA branch and verify my comments.
c) my former branch manager MR. LOKESH CHAUDHARY AND OPERATION OFFICER MR. HITESH GAUR has the main person to remove me system as they need to do wrong with company. as soon as company has terminate me a BIG FIRE AND THEFT HAS BEEN DONE IN BALOTRA, if you will investigate the both issue you will find great irrregulaties.
d) company response is only one word as there is no change of company decisions.i have not violated any clause of agency agreement. when company has terminate me almost 4 years and 11 months has passed. if one month has passed then company can not stop to give me my renewal commission.
e) i want to HDFC SLIC To activate me CC CORNER Immediately so that i can provide my services to my innocent clients. and cancel my termination and activate my agency agreement.

Suresh kumar gupta
Rawali gali
MOBILE 94141 07928

----- Original Message -----
From: Umesh Gupta
Cc: Tushar Kelkar ; Sanjay Pujari
Sent: Sunday, September 02, 2012 3:24 AM

We are not able to open the attachments in your complaint. If you can describe your complaints in detail, we will be able to direct your complaint to the right department.

As per my understanding (as per the mail below) your agency has been terminated and you were not given sufficient chance to defend yourself. You feel that agency termination has been done because of false complaint of the staff of Balotra branch.

If my understanding is right, please do the following:
a) Mail your agency code.
b) details of all the incidences step wise in the proposal/s..
c) What is your view and which staff has framed you wrongly? What are the wrong things done by them?
d) What has been the company's response? Did anyone talk to you to check details? If yes, who and describe the details.
e) What do you want from HDFC Life now?

To process further, we will require the above details. I am also marking the mail to Tushar Kelkar and Sanjay who take care of complaints and grievances of FC's.

Umesh Gupta | Associate Vice President | Customer Relations | HDFCLife
11th Floor, Lodha Excelus, Apollo Mills Compound,
N. M. Joshi Marg, Mahalaxmi, Mumbai-400011.
Direct: 022 6751 6128 | Board: 022 6751 6666 | Mobile: +91 99209 13009

Integrity |Innovation |Customer Centric |People Care |Team Work |Joy & Simplicity

To: ,
Date: 31/08/2012 02:22 PM


Dear sir
pl read my issue and try to resolve and investigate free and fair conclusion.
suresh kumar gupta
94141 07928
----- Original Message -----
From: Customer Relations
Sent: Wednesday, May 30, 2012 3:17 PM

Good Morning. Thank you for your e-mail of today's date. I confirm that it has been passed to our Group Financial Crime team and they will be in contact with you shortly.

Mike MacPherson 0131-245-2451.



30/05/2012 03:39




Hon sir
I am certified financial consultant of HDFC STANDARD LIFE INSURANCE CO LTD Mumabi.

my code number is 00041214

My request you as under.

1, Company has terminate me on the basis of false complaint of LOCAL STAFF i.e. BALOTRA branch

2. The both person has left the company

3. Due to my termination and lake of services my innocent client has lost almost 20 lakha INR AND POLICY HAS DEACTIVATED.

4. I very humbly request to company to provide the letters/emails/on which basis the company has terminate me but company has not provide the papers.

5.i also pray to company to provide the clause of agency agreement on which basis i have voilete this clouse but company has not replied my a singal word.

Pl help to resolve my issue and reach a free and fa ir investigation in the interest of INNOCENT CLIENTS

the CEO OF HDFC SLIC MR.AMITABH CHAUDHARY mail id is [email protected]

suresh kumar gupta
rawali gali
BALOTRA 344022
MOBILE 94141 07928 Connect With Us On

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Vikas Gupta
1 decade ago
Dear Madam,
Once again accept my Congratulations for showing the courage against such a Group, whom against nobody from Media wants to be. Sahara is a totally manupulative & corrupt group.
Sucheta Dalal
Replied to Vikas Gupta comment 1 decade ago
Many thanks Mr Gupta for your kind comments. Deeply appreciate !
w regards
1 decade ago
Indians, at least 90 per cent of them are being taken for a ride by a small section of the rich and the powerful. Voices like this get drowned in the festivities this small section organize to divert public attention from real issues. Those who ‘manage’ media groups with multi-edition and multi-language newspapers and magazines and now the owners of television channels ‘satisfy’ almost all interests which can be satisfied with money. Check out the proportionate-to-influence donations they pay to political parties and the benefits they receive. But, having said that, we should continue the efforts to bring about changes with full faith in the coming generation.
Vaibhav Dhoka
1 decade ago
What is the faith of CRB depositors?It is 21 years old cfraud.Delhi high court has appointed liquidator,but public gets no information about it.This is happening in every case from Suman Motels,and plantation companies.They are very clever and knows will which procedure be adopted to LOOT gulliable investor.Therefore few months back in this magazine I wrote Why FD? close to most investors.Now one doubts to invest in mutual fund as most of them are giving NO returns or negative returns after a long WAIT.Even judicial actions does not help due to DELAYED JUSTICE system in India.
P M Ravindran
1 decade ago
However good the apex court order may be I will believe that it is less than just till all the regulators who had connived are brought to book! Even the CRISIL and CARE rating are frauds. I remember believing their credit rating and investing a bit of my retirement benefits in Lloyds Finance and not even getting the interest after the 1st quarter! Worse, on my word some of my relations also invested, leaving me in an uncovetable situation later!
arvindkumar baid
1 decade ago
Hats off to you. I admire your courage and perseverance to stand for the truth. Just for your information you have written the same thing that i am telling a number of my friends and acquaintances since the judgement. I want to add further that the logo that indian cricket players carry on their official uniform may have made a lacs of gullible people living in rural india believe that sahara is a government organisation. It has used our craze for cricket so effectively to create a big empire without any hype. Now he is using the cricketers for his new venture. I am sure our so called great cricketers, who are not playing for India but a so called Trust (BCCI)which doesn't come under government superivision,must had amassed a very big amount from sahara to appear in its advertisement. Even the business news channel showing programs such as " Pehredaar" and " Fight Back " don't have guts to show the truth and discuss the judgement. Even Maneka doshi of CNBC who discusses a number of judgements and changes in company law in her program "The Firm" has not shown any courage to walk against the winds.
arvindkumar baid
Replied to arvindkumar baid comment 1 decade ago
Even mr. sanjay pugalia of cnbc awaaz has not shown courage to give an X Ray Report of the Sahara Group.
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