It is almost 20 months since Supreme Court (SC) ordered Dr Subroto Roy, chairman, Sahara Group in August, 2012 to return a gargantuan sum of Rs 20,000 crores that two of its group companies in real estate sector had taken from millions of investors.
Dr Roy had contested the amount stating that its outstanding liability to investors was only about Rs 5000 crores and this was deposited with SEBI towards end of 2012. SEBI – with full backing of SC – has been doing a wild goose chase to ensure recovery of full amount with interest and penalties.
But, that has not yielded results leading to recent arrest of Dr Roy. SC had directed him to come up with a concrete plan. However, he submitted proposal for just half the amount of over Rs 35,000 crores now claimed by SEBI.
Dismissing this as disrespect and contempt of court, SC in a recent hearing ordered continued detention of Dr Roy till next hearing in March (end) when, Saharas are required to come up with a credible action plan with prompt payment schedule.
Given wide differences between the assessment of SEBI/SC and that of Sahara’s and gaping holes in ownership and valuation of various assets & properties that need to be disposed off to generate required money, stalemate is unlikely to end any time soon.
Meanwhile, combing through micro details of the saga, one comes across a startling reality that raises a question mark over the very premise and the track on which regulatory authorities have been proceeding against the Saharas.
Out of Rs 5000 crores or so, SEBI has thus far refunded a meagre Rs 1 crore to concerned investors. That represents a pittance 0.02% of the outstanding liability assessed by Saharas. As percentage of amount claimed by SEBI, this gets even more miniscule 0.0028%!
Could this be attributed to in-efficiency of SEBI in processing documents (truckloads of them deposited by Saharas) or simply lack of infrastructure? This is highly improbable as in money matters involving huge sums, room for tardiness is minimal.
Another critical point to take note is this. Unlike other similar frauds perpetrated on millions of gullible investors where they have lost thousands of crores, big outcry and even cases of suicide, in the instant scam, nothing of that sort is visible.
Juxtapose the above two points – both very unusual and contrary to conventional wisdom – one gets to some stunning and bewildering questions.
Are those millions of investors not traceable? Is it so difficult for authorities to trace them? Why do they not come up ‘on their own’ to collect? Why do they have to be goaded? Where have they disappeared? Do they really exist?
If, a person having lost all his hard earned savings does not cry, come forward and can’t be traced, what does one make out? It only confirms a lingering doubt that even though investment was made but, investors were not genuine.
It is a clear indication that some one who wanted to keep his identity ‘hidden’, had invested under a ‘fictitious’ name and address. So, when the lid blows over the scandal, obviously you won’t find him; because a genuine investor never existed!
Who would be keen to keep his identity hidden? Clearly, it is a person who had black money and wanted to make it white and thus, land in a safe zone. With so much of black money around, one could easily imagine millions of fake investors looking for right platform.
From the perspective of black money mongers, a convenient investment opportunity would one where their actions could escape the not so watchful eyes of the regulators. The ‘optionally fully convertible debentures (OFCD)’ issued by real estate and investment firms of Sahara provided the right fit.
These instruments were neither full-fledged deposits that could come under the oversight and supervision of RBI nor these were equity which would fall under the jurisdiction of SEBI. These were a so sort of hybrid lying on the periphery being no one’s baby in so far as regulatory control goes.
It was a pre-meditated and well orchestrated plan aimed at helping hoarders of ill-gotten money. The proof of pudding is in eating. The plan worked very well and huge empires were built and proliferated acquiring legitimacy under the eyes of the law.
It was all going on smoothly until SEBI took notice of this in 2010 in the context of evaluating some other proposal submitted by the group firms. SEBI had to struggle hard to demonstrate that it had jurisdiction to proceed in the instant case.
The judicial proceedings culminated in the apex court ordering return of money in August, 2012. Now, with Dr Roy in jail and SC vigorous pursuit, it might be possible to make Sahara eventually pay up the entire amount.
There being hardly any genuine investors to whom money could be returned, SEBI may put it in a ‘pool’ and use for protection of investors at large in a variety of ways. It may also share a portion of this with government for reducing its fiscal deficit. But, authorities would do well to go beyond.
Prima facie, it is very clear that Sahara schemes provided an easy platform for money laundering, prosecution should be initiated under provisions of ‘Prevention of money laundering Act’.
The enforcement directorate should initiate necessary investigation and follow up with prosecution of all those involved. All arms of the government viz., SEBI, RBI, Finance Ministry etc should act in unison and coordinated manner to lead the investigation and prosecution to a successful end.
For the future, there is dire need for greater oversight and surveillance transcending beyond the mandates of each of existing regulators who operate in water tight compartments. Perhaps, this role may be assigned to a super-regulator. It needs to focus more on overall intelligence/surveillance and give timely alerts to sector/area specific regulators for necessary action.