Sahara: Ghost, Duped Investors & Regulatory Failure
On 14 November 2023, when the Sahara group founder, Subrata Roy died, hundreds of questions about this strange business group remained unanswered. The Sahara story consists of Mr Roy's grandiose dreams, shocking controversies and inflow of tens of thousands of crore rupees from crores of depositors, who have never been identified in one place. An equally important part of the story is the abject failure of supervision as Sahara raised vast sums of money at will without approvals or checks & balances. The blame lies equally with the ministries of finance, company law and cooperatives, serious frauds investigation office (SFIO), Securities & Exchange Board of India (SEBI) and Reserve Bank of India (RBI). And now, it seems regulatory muddling will continue after Mr Roy's death.
On Thursday, SEBI chairperson Madhabi Puri Buch said the "Sahara matter will continue for the capital markets regulator even after the death of the group's founder Subrata Roy."
SEBI had asked the Sahara group to deposit over Rs25,781 crore which it had illegally raised. Sahara deposited Rs15,506.81 crore. It is not clear what more SEBI can do, other than making fresh demands when it has only refunded Rs138 crore (including interest of Rs67.98 crore) in almost a decade. If no depositors are screaming for money, were there no real depositors worth talking about?
Meanwhile, four cooperative entities of Sahara have raised almost Rs87,000 crore in 10 years starting 2010, which remains in limbo! How was Sahara continuing to raise money? Doesn't the enforcement directorate (ED), responsible for money laundering and benami transactions, want to know?
Meanwhile, if a media report is to be believed, the government will expropriate tens of thousands of crores, lying unclaimed with SEBI. After this, all questions about the strange story of Sahara will be buried once and for all.
At 30, Subrata Roy started his entrepreneurial journey at Gorakhpur, with Rs2,000, a peon, a clerk and his father's Lambretta scooter. After several initial efforts that did not amount to much, Mr Roy hit upon a small savings scheme, a para-banking venture, that would accept small deposits from rickshaw pullers, vegetable vendors, grocers and tea stall owners, promising them an assured return.
By 2008, Sahara India Financial Corp had become the country's largest residuary non-banking company, with a deposit of Rs20,000 crore.
In the 1990s, Sahara India Parivar, as he called his group, would progressively jump into every 'hot' business segment that it came across—real estate, media, cricket, airlines, tourism, hospitality, insurance, mutual funds, and retailing. At its peak, Sahara Parivar claimed a payroll strength of over 1.2mn (million) workers, next only to the Indian Railways.
Mr Roy, like the seasoned politicians he rubbed shoulders with, blended patriotism (his newspapers were called Rashtriya Sahara), patronage, pizzazz and a patriarchal order, to build an empire that yielded strange paradoxes. The Sahara logo was emblazoned on the Indian cricket team; a wide network of celebrities from Bollywood, sports and politics helped to burnish Sahara's credibility.
With the ease of pecking at a late afternoon snack, Sahara bought up prestigious global hotels like New York's landmark Plaza and London's Grosvenor House, and aimed for the landmark Taj Mansingh (managed by the Taj group for decades), when its long-term lease was ending.
Full-page advertisements bombarded us from every newspaper in the country whenever Sahara felt wronged or it wanted to publicise some dubious schemes such as Sahara City or Sahara Q Shop.
One advertisement called SEBI a 'sarkari gunda'.
In sharp contrast to its glitzy image and headline-making moves, Sahara's finances were completely shadowy. Not one of his businesses went public and so, the source of their funds remains unclear even today.
Even though the group remained private, Sahara should have been under close scrutiny of the ministry of finance (MoF) and RBI, given the enormous resources it was supposedly raising from the public. Instead, Sahara continued to grow unchecked and obtained mutual funds (MFs) and insurance licences.
Troubles started accidentally for the group when it made a crucial blunder. Two Sahara group companies—Sahara India Real Estate Corporation and Sahara Housing Investment Corporation—raised money through optionally fully convertible debentures (OFCDs) without seeking SEBI clearance.
Sahara did not plan to list these debentures on the bourses as required. So SEBI started an investigation and asked the companies to refund the money.
A landmark Supreme Court judgement in 2012 upheld SEBI's stand and asked the money to be deposited with the regulator. Sahara was recalcitrant and when Subrata Roy failed to appear before the Court in contempt proceedings, he was arrested and jailed from March 2014 until 6 May 2016. He was released on parole for the last rites of his mother and never went back.
What happened simultaneously was stunning. Sahara had launched a pan-India money collection drive through four cooperative societies: Sahara Credit Cooperative, Saharayn Universal, Humara India, and Stars Multipurpose Cooperative.
Over 10 years, starting from 2010, completely unaffected by Mr Roy 's imprisonment and regulatory action, it collected an additional Rs87,000 crore from around 60mn to 70mn people. Nobody knows where the money was invested and if it earned any returns, but by 2019 end, Sahara had begun to default on repayments and thousands of complaints were filed with the central registrar of cooperatives.
Stunned by this discovery, Vivek Aggarwal, joint secretary, cooperatives, and central registrar asked for an SFIO investigation which made little progress.
Less than a year ago, the apex court suddenly ordered SEBI to part with Rs5,000 crore (out of over Rs25,000 crore) to be distributed pro rata among Sahara's agitating depositors. No one seems interested in getting to the truth of Sahara's Rs87,000 crore collection, verifying the investors, checking what happened to the money or making any attempt to refund it.
SEBI continues to sit on over Rs25,000 crore plus interest. Once again, we will know the truth about the ownership of this money (over Rs1 one lakh crore), only on a serious inter-departmental probe possibly led by RBI and SFIO. This will not happen because no one is interested in finding out the truth.
(This article first appeared in Business Standard newspaper)
7 months ago
this article is good for sahara jmaakarta. Thanks
7 months ago
Strange thing is, my wife, inspite of staking claims with proof, didn't recieve anything till now where as govt is saying nobody came forward to claim their investments.
7 months ago
Excessive regulation is dumber than stupidity. I never thought I'd pair those two words in the same sentence, but that's how I characterise the average Indian investor and our regulators, particularly the latter. The average investor wants to be spoon-fed and if you don't feed them adequately or change their diapers on time, they will throw a temper tantrum. Regulation is no cure for financial illiteracy.
Kamal Garg
Replied to adityag comment 7 months ago
Regulation is , of course, no cure for financial illiteracy.
With every failure on the part of various probe agencies and regulators in India, we try to frame more strict rules, but, as said, it is "dumber than stupidity" , as criminals catch up with new rules and regulations with the connivance of same government officials who framed the rules.
7 months ago
The Sahara story compares with Suman Motel Group story. I am stuck with Suman Motel since more than 25 years. I am now a Senior citizen, almost 76 years old and have been trying since long to recover the money that I had invested there. Is there any hope? Can someone guide me? The EOW keeps on saying go here, go there, whereas the Suman Group says that EOW has taken charge of their property and will distribute the money from the proceeds. The energy, for follow ups is ebbing ( as I have moved to Malad west) and I am in need of the money. Can someone guide me? Please.
Replied to bajaj3 comment 7 months ago
me too same fate as yours-- there is not trace of SUMAN MOTELS I heard , it was backed by some Underworld people --now nothing can happen
7 months ago
DAYLIGHT DACOITIES abound & there is NO WAY for time bound investigations, results & JUSTICE !

SICK Democracy without Justice
7 months ago
how much money went to P.Chidamram as well as samajwadi party chief?
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