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.”

Sebi-Sahara row: Why people are still willing to deposit money with Subrata Roy’s company

saharashree_350_0_022814095142Two days ago, some 24 hours after Sahara’s Subrata Roy was arrested at the command of the Supreme Court, I had an interesting phone conversation with a Sahara depositor. This was someone who was not just made a deposit with Sahara in the past, but was planning to do so again soon. He knows many people who are regular Sahara depositors. He had a form with him for two schemes. One of them offered a gain of 10% for a tenure of one year, and the other, a gain of 40% for a deposit period of 48 months.

That’s also about 10%. There are several things here that those who are acquainted with the Sahara affair only through TV and newspapers would find surprising. One, there is still financial business being conducted under the Sahara brand. This example is from Jharkhand, and not from a small town either. Two, there are people who are still willing to deposit money with Sahara. This particular depositor is an educated man who has access to the entire range of financial instruments.

Three, I think there are at least some media commentators who would be surprised that there is any such thing as a Sahara depositor. And four, those who’ll try to think through this thing will see that 10% per annum is hardly an outsize or a Ponzi-like return being offered.

So why are people still willing to deposit money with Sahara? As far as I can see, simply because they started doing so in the past and the experience has not been negative. They did so in the past, got their money back with the promised returns and it just goes on, even when they have access to alternatives.

One thing about Sahara, which is getting lost in the excitement about the legal tricks that the Sahara group has been playing with Sebi and RBI, is that there is a real savings and investments business that exists. This business is likely to be illegal now, likely to be declining, it may be wrapped up in a larger money-laundering scheme, and its scale may be smaller than the claims of Sahara.

However, there really are a large number of depositors who use Sahara’s services and have done so for years, even decades. This is something that anyone who has first-hand familiarity with life in small towns of the Hindi belt can vouch for. This business still exists. When, in 2008, RBI asked Sahara to wind up this business, it should have done so in a law-abiding manner. However, it didn’t and RBI failed to detect that it didn’t.

Currently, there is a lot of noise being made about the interests of depositors by various authorities and the media. However, the actual focus and the actions do not have the depositors’ interests at heart. One reason is that there is a certain belief that these depositors don’t exist, that Sahara is entirely a money-laundering scheme.

This simply isn’t true. To my mind, the most important question today is what is the real base of investors and if there are enough assets backing their deposits. The long period over which Sahara has existed and the reasonable returns it offers make it unlikely that it’s an out-and-out ponzi scheme like Saradha in Bengal and so many others.

However, there may well be some shortfall in assets. Sahara may be a rogue financial institution. And if the rogue part of that description is true, but so is the financial institution part. The most important thing today is to provide a safe exit to real depositors. The cat and mouse game of the so-called Sahara Shri will no doubt continue to entertain all of us for a while. However, someone needs to pay some attention to the real small depositors.

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.

Sahara India announces relief for calamity hit Uttarakhand

Sahara IndiaLucknow based business conglomerate, Sahara India has joined the efforts to provide relief to pilgrims and also the state of Uttarakhand which was hit by natural calamity.

Sahara would provide both immediate relief as well as long term measures for overcoming the crisis. The group has dispatched more than 1 lakh water and juice bottles each to the state and deployed 25 medical health vans equipped with doctors and medicines.

More than 1,000 volunteers from the company’s workforce would also be dispatched to the state to help in relief work. Blankets, solar lanterns, and other necessary material is also being sent to the state.

A company spokesperson said that while some material and men have already been dispatched for the state the remaining would be sent on an urgent basis. Sahara India also announced that it will construct 10,000 pre fabricated houses in the state to provide long term relief to those whose houses have been destroyed.

Also, 10,000 families will be provided monthly ration and household items for several months till the time they get back to normal life.

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