SEBI trying to ‘siphon off’ investor refund: Sahara

The Securities and Exchange Board of India has claimed that it has spent close to Rs 60 cr in 2013-14 on locating genuine investors of SIRECL and SHICL.

Sahara India has alleged that market regulator Securities Exchange Board of India (SEBI) is trying to “siphon off money from the funds” deposited by the group for refunding the investors of Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL). SEBI has claimed that it has spent close to Rs 60 cr in 2013-14 on locating genuine investors of Sahara group companies Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL).

“We have spent a huge chunk of our money on this and we are running out of money now. We had requested the Supreme Court to allow us to use the funds deposited by Sahara India so as we can meet the expenses incurred on this task,” said a senior official from SEBI requesting anonymity.

The official explained that SEBI has spent a large amount on not just locating the investors but also on the storage of the documents submitted by Sahara. In an email response to The Sunday Guardian, Sahara India’s counsel, Keshav Mohan, stated, “We suspect that this is a highly malicious campaign initiated by SEBI with a very clear intention to siphon off money from the funds that Saharas have deposited with SEBI, purely for the repayment to its investors. It is really unfortunate and unbecoming of a regulator, the way SEBI is blowing hot and cold, both at a time.”

He further pointed out that on Thursday, the counsel for SEBI had argued in the Supreme Court that SIRECL and SHICL issues were public issues, while now SEBI has made a plea that Sahara’s investors are untraceable. “We ask SEBI to disclose the basis of their contention, else withdraw their statement. The fact is that, when SEBI sent letters to about 20,000 account numbers and did not receive any responses for them, we immediately got affidavits from a large number of such investors and submitted to SEBI the affidavits, authentic Know Your Customer (KYC) documents and photographs of almost all those investors, who the regulator had tried to contact. Those who were already paid, confirmed that they had received redemption of their investments to their full satisfaction,” Mohan noted.

In a strong rebuttal to SEBI’s allegations, Mohan further added that the market regulator has not been following directions and has not refunded even Rs 1 cr to the investors, in the last 15 months. “It is not known, why SEBI is not following this direction, and why it is only interested in extracting money from Sahara…SEBI’s intentions are unfair and acutely malafide.”

Mohan also pointed out to the fact that on 4 March, SEBI told the court that it had completed the scanning and digitisation of the 3.03 crore investors’ documents provided by Sahara. Therefore the verification process has still not started.

Mohan also recounted that the Minister of State for Finance, Namo Narayan Meena in a reply to a question in Parliament had said that the money given by Sahara is for refund to the investors only and the money would not be utilised for any other purpose. “The money received by SEBI will only be used for the repayment of the investors and till now SEBI has only refunded only Rs 1 cr. This is a sinister attempt by SEBI to eat away investors’ money. Till now, in Saharas’ case SEBI has not shown any intention to protect the interest of investors, for which it has been constituted… we will not let SEBI make this another Golden Forest Case where investors have still not got their hard earned money and will stand and fight till the end in the interest of our investors.”

I’m bouncing back, says fugitive

A year ago Mohammed Noorul Haq was the developer behind a dozen planned towers across some of Dubai’s biggest projects. Today, he has sought refuge in India after allegedly leaving a trail of bounced cheques totalling Dh18 million (US$4.9m), and faces jail if he ever returns. Mr Haq, 50, the chief executive of the Sanali Group, is just one of many developers who have left Dubai after pitching to investors with glossy magazine adverts and roadside billboards to buy luxury apartments in buildings that never made it out of the ground. Seven months after returning to India, he is still making bold promises of repaying the people who now hold his cheques.

“We tried to sell properties in Dubai and could not find any end users,” he said in a telephone interview from Hyderabad, where he now lives. “But we have around Dh4.5 billion of assets in India. I am closing a deal right now. Give me two weeks.” Like some other small developers in need of cash to fund their projects before the downturn, Mr Haq had convinced investors into buying properties by assuring them that he would buy them back at a later date at a higher price, guaranteeing the deals with post-dated cheques that have now bounced.

Property insiders call such deals “buybacks” – transactions that are seen only in rapidly rising markets fuelled by speculators. During the peak of the Dubai property market last year, investors bought and sold off-plan properties in rapid succession, in a practice that became known as flipping. Mr Haq is said to have promised buyers a return of up to 30 per cent on deposits they had paid on apartments located on Sheikh Zayed Road and in Maritime City, another development in Dubai.

When the market turned and prices started to fall, however, the scheme quickly unravelled and Mr Haq was arrested and taken into custody more than once before being released after agreeing to pay off the investors who had brought the complaints. He later left the country. The Real Estate Regulatory Agency in Dubai warned investors in November to be cautious about entering into such buyback arrangements.

A Dubai police officer said: “Mr Noorul Haq is wanted in the UAE. There are 15 cases now against him for bounced cheques that amount to several million dirhams.” A police officer at the bounced cheques department said: “He was arrested in Bur Dubai for a short period in January. One case was filed at the Jebel Ali police station and 14 at Bur Dubai.” Unlike several other developers who became involved in buyback deals in the UAE, the Sanali Group had a record in property development in India, where the company has launched about 30 projects and completed about half of them, according to its website. But in Dubai the group has not built any of the 11 towers it launched.

Mr Haq left Dubai in February but insisted he was open to talk to his investors. “I did not run away but if I go to Dubai now and something happens to me, I can neither sell nor pay anything,” he said. “I am available to all my customers through video conferencing and I always pick up the phone.” The Sanali Group website describes the company as “a trailblazing construction company that is at the forefront of the infrastructure revolution”. The section on Dubai claims: “It is estimated that by 2009, based on current growth, your initial financial investment is expected to at least double.” It is unclear when the website was last updated.

Despite the claims on the Sanali Group website, Mr Haq acknowledges that some of his projects will be cancelled. But he hopes he can sell others. “I have invested around Dh200 million in Dubai. We have 11 projects” he said. “Four towers will be cancelled, including Sanali Hanover and our project on Palm [Jebel Ali]. We can sell plots of land. We have six towers in Dubailand for instance; we can consolidate them into three.”

But some investors remain sceptical that he will raise sufficient funds to repay them. A former sales agent with Sanali who did not want to be named said: “Noorul Haq is used to asking for another two-week deadline. He has been saying that to investors for six months.” The agent claims to have invested Dh800,000 in a Sanali buyback but does not hold a cheque. Hisham Ansari, another investor, recently travelled to Hyderabad to meet Mr Haq. “We have waited for almost two years and he has not started anything. All investors are joining hands now.”

Back in Hyderabad, Mr Haq still talks using the language of the property tycoon, frequently referring to large sums of money and forthcoming deals. While his promises may be questioned by many of his investors, he blames the downturn for what went wrong with his company. “I never thought that the market would go down,” Mr Haq said.