Sahara india scam explained : This topic is about a scam that is being criticized from the last few years. When any company raises fund from public for the first time in stock market then it is called IPO or Initial Public Offering. Company at first needs the SEBI’s (capital market regulator) permission to bring the ipo in stock market. For the permission it is compulsory for the company to submit their DRHP (Draft Red Harring Prospectus) to the sebi.
DRHP is a one type of company’s biodata that includes company’s all data like subsidiary,group companies,objective of the structure,capital structure,issue informations,financial information,promoters & managememt details etc. Sebi analyzes the whole data or drhp and then sebi decides to give or not give the permission to the company.
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Sahara india scam explained
On 30th september,2009 Sahara Prime City filed drph to the sebi. while analyze the drhp of sahara prime city sebi found the error process of raising fund from public of sahara india’s main two companies. They are SIRECL(Sahara India Real Estate corporation) and SHICL(Sahara Housing Investing Corporation).
On 25th december,2009 and 4th january,2018 sebi got the complaint against the sahara india’s two companies describing that this two companies raised funds from public issuing OFCDs in error way. For this two complaints sebi’s fear was out right and started to investigate on the two companies. Sebi wanted the clarification of fund raising from the two companies.
As a result sebi come to know that sahara india raised funds of about 24000 crore from 2-2.5 crore investors. From starting of the company there is a complaint of no transperancy of raised fund and where did the fund use between promoters and investors. Sirecl and shicl raised the fund issuing OFCD(Optionally Fully Convertible Debentures) to the public.
Deventure is a debt instrument that is used to borrow money from public or investors and after a paticular time public or investors were got their money with interest. Ofcd is one type of debenture where ofcd holders can convert their ofcd into shares and they can become shareholders of the company.
It means amid a particular time ofcd holders have a option of converting their ofcd into equity. When any company wants to issue the ofcd less than 50 then the company have to take the permission of ROC(Register of Companies) and when any company wants to issue the ofcd of 50 or more than 50 then it is compulsory for them to take the permission of sebi.
And the fund raising process is compulsory to complete withing 6 weeks. But shicl and sirecl raised fund issuing about 2.5 crore ofcd without taking the permission of sebi and they continued their program from 2 years. For this illegal activities of this two companies sebi banned them to raise fund using ofcd from investors or public and ordered sahara india to give back the money of investors with 15% interest.
Sahara Counter Challenge in Court
Sahara india challenged the order in Allahabad high court. And december 2010 allahabad high court declined the sebi’s order. In april,2011 allahabad high court gave the permission to start the sebi’s pending order. For this sahara india appealed to the supreme court. Supreme court adviced sahara group to approach the SAT(Securities Appellate Tribunal) at first.
But sat gave the order of returning investor’s fund with 15% interest to sahara india group. But sahara india challenged it in supreme court. Sahara india told that the process of issuing ofcd of shicl and sirecl was a private placement not a public placement that was only for the people who connect with sahara india group and also shicl and sirecl were not the listed company so the case was not under sebi’s area.
In return of sahara’s saying sebi told that in private placement any company could raise fund from less than 50 investors issuing ofcd but sahara india raised the fund from about 2.5 crore investors issuing ofcd. And for that sebi’s permission was compulsory but sahara group did not take the sebi’s permission. When ofcd is issued more than 50 people than it becomes public issue and it comes to the under of sebi.
Then the sebi’s board member Dr. K.M.Abraham was investigating the case and he did the verification of sirecl and shicl ‘s four ofcd holders randomly and he came to know that 2 ofcd holders of them were not real investors and other 2 holders had no relation with sahara india till so far. For this sebi told the court that sahara group did fraud.
Without it sebi told the supreme court that ofcd is security according to security act so the ofcd was under sebi’s rules and regulations. In this way sebi proved that this case was the favour of them.
So on august,2012 sebi ordered sahara india to deposit all the ofcd holder’s money with 15% interest to the sebi within 3 months and told to submit the ofcd holder’s details so that sebi could return the investor’s money. Sahara india sent 127 trucks full of ofcd holder’s details to the sebi and sebi rejected some trucks because of crossing the deadline.
After investing the ofcd holder’s details sebi came to know that there was no proper accurate details of ofcd holders. Sebi and court were semmed that it was sahara india scam. Sahara india did not deposit all the money of investors within 3 months.
For this supreme court ordered the sahara group to deposit the whole money in three installment. Sahara deposited its first installment amount of 5120 crore to the sebi. But sahara did not deposit their other two installment within deadline and started to tell that they returned the rest of the money to the all investors before.
And only 4600 investors amid about 2.5 crore investors claimed their money to the sahara india group. So sahara told that rest of the investors did not claim the money because we returned the money before. So the supreme court wanted the proof of returning the amount of investors and the sources from where they got the money.
But sahara did not give any evidence. So the whole matter looked questionable to the court. The court and sebi feared because it may be money laundering. It was seemed to the court that most of the ofcd holders may be from rural areas where they did not know the ofcd.
Sahara did not pay their 2nd and 3rd installment before deadline so sebi started to seal their bank accounts and attach or grab their properties.
On 26th february,2014 Supreme Court ordered to arrest the chairman of sahara india,Subrata Roy. And on 28th february subrata roy was arrested. And with him other two directors of the company were arrested. On novermber, 2017 Enforcement Directorate complained money laundering against the company.
And the case is continuing till now. It was not the first time for sahara india. They broke the rules and regulations before. In 2007-2008 Sahara India Financial Corporation was caught to do unethical activities by RBI and banned them to raise fresh deposits. Sahara needed fund continuously. So after banned by rbi sahara raised fund by ofcd root.
Here this incident was very suprising that when shicl and sirecl appealed to roc(register of companies) for raising the fund by ofcd then the net worth of this two companies was below 50 lacks rupees. But in spite of this roc gave the permission of raising fund of more than 20000 crore rupees by ofcd. Sebi could return only 85.03 crore rupees to the investors.
Sebi tried to find out the investors in the rural area of north and north east area but sebi did not find any investors because of lack of the information and they failed on their mission. One time sahara india was the second largest employer of india after irctc.
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Sahara india scam explained
On 30th september,2009 Sahara Prime City filed drph to the sebi. while analyze the drhp of sahara prime city sebi found the error process of raising fund from public of sahara india’s main two companies.