Sahara's Face Blackened

Sahara’s Face Blackened

The proverbial long-arm of the law appears to have caught up with parabanking real estate mogul Subrata Roy Sahara and his diversified conglomerate. The Supreme Court, via a vehement two judge bench, heard his pleas for several hours, unmoved.  At length, it denied and disallowed any flexibility in the repayment of some Rs. 24,000 crores ‘illegally’ raised from ‘millions’ of alleged investors.

In an unusual show of exasperation, rigidity, harshness, even anger, the honourable and learned judges said Roy had been consistently lying to the apex court for one and a half years while mocking the judiciary by submitting false affidavits. It refused to believe Roy’s contention that he had in fact paid back most of the investors already, mostly in cash, as some  were often simple folk like rickshaw pullers, who are not likely to acknowledge communications from SEBI as to whether they had been paid. And people at that level often had little by way of a fixed address but were in touch with one or the other of Sahara’s army of 12 lakh staff.

It must be remembered, for context, if nothing else, that the Sahara Group, which told the Supreme  Court that it had paid back Rs. 137 lakh crore to its investors over its nearly four decades in operation, started with an investment of Rs. 2,000/-, and a scooter, in Gorakhpur, Uttar Pradesh, way back in 1978. Roy took over a near defunct chit-fund company called Sahara and remodelled it after Peerless style residuary non-banking companies that accept deposits in tiny amounts.

Roy offered to send hundreds of Sahara staff to help SEBI verify the truck-loads of repayment documentation submitted. Again, this too cut no ice with the highest court in the land, which suggested that perhaps many of the investors were fictitious. It ordered Roy and two of his directors into judicial custody in Tihar Jail in New Delhi till March 11^th  , or sooner, if an acceptable method was found on how the money was going to be repaid by ‘cheque or draft’. The visceral implication is that the Sahara Group is a huge black money cum laundering operation. It is true enough that rumours have long had it that there is a lot of politician, bureaucrat and film star money that circulates and rotates in the coffers of the Sahara Group. But, this run in with the law at the level of the apex court is an unprecedented first in 37 years.

Still, there is nearly Rs. 5,600 crores of the 24,000 crores in liquid form already with SEBI of which it has disbursed only a meagre Rs 1 crore to some investors. At the core of this case seems to be a crackdown on the Sahara Group and its extensive dealings in cash at the grassroots level, and on the fringes of the regulatory environment. SEBI, since its powers were enhanced, has had scant success with any of its investigations so far, but this time, thanks to the might of the Supreme Court joined to itself, it seems to be making its mark.      

Roy promised to furnish an irrevocable bank guarantee for the entire Rs. 24,000 crores and promised to pay back all investors still not reimbursed by selling real estate assets. But alas, even this was not accepted by the august judges of the Supreme Court who asked for a better and more reliable scheme. What is crystal clear is that Roy has lost all credibility with both SEBI and the Supreme Court, and would be best advised to comply with their wishes and put this behind him and the Sahara Group. There is, after all, no appeal to anyone except God beyond the apex court! Until a final verdict, one can’t even ask for a review!

While the Supreme Court decisions cannot be questioned, a casual observer may wonder how liquor baron Vijay Mallya suffered no such personal humiliation and harsh stricture for the collapse of Kingfisher Airlines, with massive unpaid debts, thousands of unpaid employees, huge dues to the Government etc.. He is even personally liable for some of the Airlines’ debts. But, of course, every case is different, and the wheels of justice may just have not got around to the point of reckoning as yet for the King of Good Times.

And then there’s Capt. Gopinath from whom Mallya bought his low-cost airline Air Decccan and took over its debt, before that too went the way of the premium brand Kingfisher.  Sahara was better at selling off its airline before it blew too big a hole in its finances. But all of this has been regarded by the Government, the regulatory authorities and the judiciary in a reasonably dispassionate manner. It is only in this instance, albeit after giving Sahara a year and a half to comply with its strictures already that the boom has been lowered. 

Still let us remember that the Government itself routinely wastes tens of thousands of crores in failed ventures and badly structured deals. The CAG may complain but nothing happens by way of accountability for all the public money. Everyone goes scot-free. But when it came to Subrata Roy Sahara the court may have decided to set new precedents for the future. 

(872 words)

March 5^th, 2014

Gautam Mukherjee