Sahara SEBI Issue – Statement from Keshav Mohan, Advocate

We are disappointed with the judgment that has been delivered by the Hon’ble Supreme Court earlier today. We are still in the process of reading and understanding the judgment. The voluminous evidence that we have already submitted to substantiate our stance may have possibly been misunderstood.We maintain that we have already refunded to 93% of our investors. Most of the payments made were in cash, as per the RBI norms and in accordance with SEBI and SAT orders. In addition to ledger entries, we had also submitted original vouchers, receipts and other concerned documents in original being physical proof of the payments and are with SEBI pending verification.

We expect to return to the Hon’ble Court in the near future with further evidence of our compliance of the Hon’ble Court’s previous orders, and to satisfy the Hon’ble Court of our earnest intentions moving forward.

The Hon’ble Court has indicated that it expects us to make a new proposal. Since the beginning, we have been trying hard to present the best practical proposal. We have always maintained that this will be actually a double payment which we are asked to make hence a serious relook into the business and financial status is required each time. In light of today’s direction, we will try our best to derive a fresh proposal to the best of our capacity and hoping to satisfy the Hon’ble Court. For this, we would also apply to the Hon’ble Court that our properties and bank accounts be defreezed so that we are in a position to come up to the expectations of the Hon’ble Supreme Court.

We take this opportunity to reiterate our deep and abiding respect for the Hon’ble Supreme Court of India and our commitment to follow the order in letter and spirit.

Keshav Mohan

Subrata Roy’s true story unfolds

Can an Indian be jailed in advance?

Today there is plenty of private business, big and small. It was not so before the 1991 reforms. Big business was under government control, and not very different from the government. An educated young man had the choice of two bureaucracies. The difference was that if a business failed or if it did not like someone, he could lose his job.

One of my friends found himself out of a job. He did not have much money, but he had a brain. He found a strange new opportunity. Most small businesses were family firms. They were liable to get into trouble. The owner may die without an heir, or without a will. There may be too many claimants for the business. And while they quarreled, the business would go to the dogs. He made an offer to such people: he would manage the business professionally till they got over their troubles, and would hand it over to whoever succeeded. In the meanwhile, they could have the profits he made; he would only charge a commission on the profits. He recruited young IIM graduates, and put them in charge of the businesses. They got experience, he got his commission, and the failing businesses prospered.

However, his services were available only to businesses big enough to afford them; what about smaller businesses? Small businesses bear even greater risks. Banks do not like them, so they have to borrow from non-banks, also known as moneylenders. They too, like my friend, would want to make sure that the businesses were managed competently. So they would collect information about their borrowers, meet them frequently and get accounts from them.

Such a business is labour-intensive: collecting money from a lot of small kabuliwallahs and raddiwallahs is a lot of work. But there are richer fellows who need the same service. A girl from a Himachal village may learn to pose by watching television and rise to be a film star. She may suddenly find herself earning lakhs with no clue about how to invest them. If she finds someone competent and trustworthy to manage her money, she may continue to rely on him even after she becomes Deepika or Katrina.

sahara-india272__373758030Subrata Roy was one of these informal investment bankers. Famous actors did not turn up at his parties simply because he had a toothbrush moustache or  dressed smartly; they came to him because he gave them a valuable service, competently and honestly. He grew so big that he could afford a palace. They lent him so much money that he had to diversify his investments into expensive property. He could do this because the 1991 reforms created the business opportunity.

But the reforms did not abolish the old establishment. Manmohan Singh went up and up; he and his likes continued to control the public sector. They continued to promote and reward Sinhas and Banerjis. Judges joined sessions courts, and rose slowly up the ladder to the Supreme Court. They just refused to believe that a business like Sahara’s could be legitimate. This Roy was too flashy, too handsome; he had to be up to something shady. It must be hawala, tax evasion, sex ­— whatever an imagination run riot could grasp.

So they set their running dog Sebi after him. It asked him for documents. How to show them documents of thousands of little borrowers? He took truckloads of them to Sebi. Without looking closely at the business, it decided that he was a crook, and took him to court. The courts were not impressed by its lack of evidence, so it appealed all the way to the Supreme Court. The Supreme Court summoned him. When he did not respond quickly enough, it sent him to jail for ten days.

Why 10 days? When someone misbehaves in court — not out of court — a court very occasionally sentences him to stay in his seat until it rises. Ten days’ jail for lese majesté is simply unprecedented. I must stop here because displeasing a court can be very costly, as Roy has illustrated. But from what I have said, it follows that the judicial process in his case has been less than perfect. And it is not just the judiciary, but also the government, in the form of Sebi.

(This story was published in BW | Businessworld Issue Dated 21-04-2014)


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.”

Sahara Explains About Its Cash Transaction

The hearing on 11.2.2014 witnessed a lot being made out of the startling fact that Sahara has been raising money in cash and correspondingly a one-sided story has surfaced so far in the public eye. This incident has severely dented Sahara’s image and credibility which can potentially impact 12 Lakh families dependent on Sahara for earning their livelihood.

The truth lies in the fact that most of our investors are small. In OFCD an average investment is no more than a mere Rs. 8,000 while around 98% investors fall below the Rs. 19,000 mark to as low as even Rs. 500. Interestingly enough, most of these people do not have banking privileges and neither do banks aim to reach them.

On this context it is very important to take note of the fact laid down by trusted global and national studies that only 50% of India’s billion strong population has access to Banks. Hence these deprived small investors deposit their hard earned cash at Sahara to watch it grow for a safer future.

India’s truly indigenous partnership firm Sahara India has infrastructure throughout the country with more than 4700 offices which employ Lakhs of workers. Sahara was and is committed towards excellence for benefitting the society at large and continues to provide work and infrastructure services to Housing Finance, Mutual Benefit, Residuary Non Banking, OFC Debentures and Credit Co-operative Society as well as non-financial activities.

The branches and service centers of Sahara India follow strict, convenient, safe and financially beneficial policies which have been adopted to ensure priority utilization of a day’s money coming from the vast range of Sahara ventures to clear daily payments including establishment expenses, secured loans, prematurity, maturities, redemption and whatsoever which are entirely settled constitutionally at the headquarter level.

The strict aforesaid policy was followed primarily due to reasons enumerated as follows:
a. We have lost few lives of our fellow Sahara workers involved in shifting money from branches to banks and vice versa (more dangerous in the later scenario) over the years. Innumerable times have our men faced cases of snatching and robbery where some have succumbed to the serious injuries while many had to deal with minor injuries. Our men are wary of their safety to while shifting money from the deposits to the bank and vice versa as well. It is definitely neither cost effective nor viable to provide armed security at every juncture in more than four thousands of nationwide branches.

b. If the policy would have been to transfer all the collected money from our branches to the Headquarter and then back again to the branches for making payments, the entire procedure would have cost us a huge amount in the form of bank charges including further losses of interest which on continuous basis would have led to serious financial consequences that has hard hitting social impacts. This would have severely compromised with our strict day-to-day basis policy for payments.

Regarding large payments in short periods, SEBI is unwilling to understand the spread of Sahara’s network into 4700 centers across India. Careful calculations would reveal average daily financial transactions per branch to be around Rs. 2.5 Lakhs which in no way is a negligible phenomenon.

Out of the Rs. 5120 Crores deposited to SEBI by Sahara, SEBI has been able to repay only around Rs. 70 Lakhs to the investors in the last 17 months. SEBI has contemptuously ignored the Honorable Courts’ order by failing to initiate a single verification yet out of the 3 Crore investors in the last 17 months which includes the last few months of their total avoidance to report the valuation of Sahara’s assets submitted to them. We are indeed very happy this time to acknowledge the Honorable Court’s order for SEBI to come out soon with Sahara’s valuation report.

Subrata Roy Talks About India’s Economic Growth and the Necessity of Good Talent to Achieve the Target

In an interview, Subrata Roy, Managing Worker and Chairman, Sahara India Pariwar, talks about India’s economic growth and the necessity of good talent to achieve the target.

India is trying to raise 500 million skilled people by the end of 2022. How can companies help to make this dream comes true?

I think the human resource development is the best part of Indian corporate, working as the biggest platform of trained people. Thereby, they should try hard to get this target. It is also important to develop the entrepreneurial skills. The corporate sector should come forward to increase the job opportunities and take the employment as investment to boost up the economical condition of the country.

In such a doubtful economic condition, how can India manage to gain growth?

Actually, the focus is shifting to the developed countries in order to improve the economical conditions of such countries. Besides this, declining economy, inflation, degrading fiscal discipline and also the huge external deficit are the reasons for the uncertain economic condition of India. It is the high time to take some serious steps for the country. It is crucial to develop the social infrastructure, healthcare, education and other sectors. Moreover, it is highly essential to change from ‘economy of elite’ to ‘economy of collective growth’. In the past few years, India has managed to reveal nine percent growth and the economic indicators were positive for us. But, in reality, nine percent growth is very low employment generation. While you are looking forward to change the whole scenario, then it is important to change government’s point of views of dealing and implementing policies. In fact, the corporate India also has to change their objectives. It is necessary to provide good education, health services and improve the standard of living to every people of the country. To improve the economic condition, it is important to spread job opportunities at every level. As a result of it, government will receive revenue and corporate sector can get a good market for them.

Well, you are going to provide more than 56,000 vacancies. Is it one of your strategies?

Sahara has managed to get the position of second largest employer in India by Time magazine. We provide jobs in all tier 1, 2 and 3 cities. At present, we are thinking to expand our business in many sectors. These 56,000 vacancies are for the critical senior resource requirement. Moreover, we are going to hire more than four lakh employee from different levels. Sahara is spreading its business in different sectors which include luxury real estate and lifestyle venture, infrastructure and housing, FMCG and retail, financial services, healthcare, beverages and food. To make our dream come true, we are investing almost 32,400 crore in every sector of this plan.

Are people from every sector can get this job opportunity?

These 56,000 vacancies are only for some experienced and skilled people. However, we will hire four lakh people from every level very soon. Secondly, we are also providing good business scopes for people to work with their independent franchises. It is my belief that if the people and other stakeholder of a company can grow then the organization will definitely grow.

Why are you going to hire such a huge workforce?

Well, we are going to start a learning and development centre- Gurukul to provide proper behavioural training, knowledge on philosophy and our culture.

Are you planning to hire talent from tier 1, 2 cities?

They have proper education and people of small cities are very professional and skilled. The only thing that they need is the right opportunity. So our plan is to give a chance to the people of smaller cities.

Sahara India Pariwar is a major entity on the corporate scene having diversified business interests that include Finance, Infrastructure & Housing, Media & Entertainment, Sports, Consumer Products, Manufacturing, Services & Trading.