This story captures the depth of the Sahara Group Scandal: How a Financial Empire Crumbled Under Its Own Weight
A Brief Introduction to Subrata Roy Sahara’s Scam
No one is concerned about the hazards they will face while joining a business that is now on the highest rung of development. One of the most significant cases involving socio-economic offenses was the Sahara case. The Sahara Group committed fraud on the customers in this instance. The Supreme Court ordered the company to reimburse bond program investors in 2012, but the company disobeyed the ruling, which the court deemed to be unlawful. Due to two Sahara companies’ failure to pay investors Rs 19,000 crore in dues, Delhi police arrested Sahara group owner Subrata Roy Sahara in March 2014 and ordered him to appear in court.
The goal of this case study is to explore how Sahara Group was able to generate so much money according to the established norms and regulations, as well as how SEBI learned about these two firms’ wrongdoings. In the end, it is the company’s investors or consumers that suffer losses, and this case analysis demonstrates the company’s corporate irresponsibility by not paying the investors as they had earlier promised. Through this example, it is clear that social responsibility is not always rewarded by businesses, and that failing to do so will only affect customers.
Indian businessman Subrata Roy Sahara, born on June 10th, 1948, created Sahara India Pariwar in 1978.
The claimed founder, Managing Director, and Chairman of Sahara India Parivar, the most known industrial conglomerate in India, is Subrata Roy. Subrata Roy, Sahara is frequently referred to as “Saharashree” and is thought to be the main patron of the company. In 1978, Subrata Roy Sahara claims to have founded Sahara India Parivar. The Sahara Group has recently widened its scope to include industries including entertainment, real estate, media, and financial services.
Numerous companies, including Aamby Valley City, Sahara Movie Studios, Air Sahara, Uttar Pradesh Wizards, and Filmy, claim to have been run by Sahara India Pariwar.
Listed by India Today as one of the Top 10 Powerful Indians in 2012. Time magazine referred to Sahara Group as “the second largest employer in India after Indian Railways” in 2004. With over 5,000 locations throughout India, the organization employs about 1.2 million people (including field and office workers) under the Sahara India brand.
Subrata Roy Sahara- Early Life and Business Briefing
On June 10th, 1948, Subrata Roy Sahara was born in the Bihar district of Araria. In 1978, he started his own firm in Gorakhpur after completing his elementary education at Holy Child School in Kolkata and earning a diploma in mechanical engineering from the Government Institute of Technology.
In the year 1978, Subrata Roy Sahara founded his business, Sahara India Parivar, in Gorakhpur. He currently claims to serve as the Group’s Chairman and Managing Director. In India, Sahara claims to be a company with numerous business divisions that engages in a variety of businesses, such as information technology, newspaper and television production, sports, life insurance, mutual funds, real estate, newspaper and television, and film and television production. It claims to cover a large area. such as the tourist, healthcare, and consumer goods sectors.
Subrata Roy Sahara went to Lucknow in the late 1990s, and the city soon became the Sahara India family’s capital. Sahara built “Sahara City” in Lucknow on roughly 170 acres. The company describes itself as expanding expenditure and growing, and in a short period of time, Sahara left its mark on a number of industries.
In 1992, the first issue of the Hindi daily newspaper “Rashtriya Shara” was published. The business Sahara Group began operations on its big project, Ambi Valley, close to Pune, in the latter half of 1990. In 2000, Sahara TV (later renamed “Sahara One”) made its debut. Sahara Time, Sahara Samay, and Sahara Alami were the first three newspapers the company ever published.
The Indian hockey and cricket teams are also claimed to be supported by Sahara Group. Prior to the Sahara Group dropping it owing to a conflict with the BCCI, Subrata claimed to be the owner of the Indian team Pune Warriors India, a franchise of the Indian Premier League (IPL). The Sahara Force India Formula One Team, a Formula One team, may also be owned by Subrata. Sahara purchased the Grosvenor House in London in 2010 and the Plaza Hotel in New York in 2012.
What do you know about Money Laundering?
Criminals are largely driven by the potential financial gain from unlawful activity, yet they have difficulty using this money covertly. Their method of making illicit riches appear legal is money laundering. It’s a significant instrument for many illicit operations, including cocaine trafficking and terrorism, assisting criminals in growing and upholding a façade of legitimacy. Unchecked, it can undermine confidence in financial institutions and finance other illegal activities, such as violence and terrorism. Essentially, money laundering gives criminals a way to conceal their illicit profits, which poses a severe threat to both the banking system as well as society at large.
Jet Airways bought Subrata Roy’s Sahara Airlines in 2007. Since Jet had to suspend the deal once despite prior announcements, the Sahara-Jet relationship has long been a source of controversy. Following conversations between the two parties, Jet was finally able to accept the deal.
As of June 30, 2010, Roy’s Sahara Group has assets worth Rs. 1,09,224 crore. Approximately 10 lakh people work for Sahara. About 30 crore clients, according to Sahara, have made investments in the business.
Subrata Roy Sahara- A Deep Brief on Sahara Scam
Now, let’s examine how Sahara Group became embroiled in an acrimonious conflict with SEBI, in which SEBI accused Sahara Group of fraud.
We’ll talk about the notorious Sahara India Scam. Privately owned Sahara India was established in 1978. The two Sahara Group firms, Sahara India Real Estate Corporation Ltd. (SIRECL) and Sahara Housing Investment Corporation Ltd. (SHICL) are primarily linked to the Sahara Scam.
In the Sahara-SEBI case, Sahara India pariwar’s two companies issued Optionally Fully Convertible Debentures, for which the Securities and Exchange Board of India asserted its authority and raised concerns about why Sahara had not obtained its consent.
We must first comprehend the IPO and DRHP in order to comprehend how the Sahara Scam initially got SEBI’s attention.
Keypoints in a Nutshell:
- Sahara Housing Investment Corporation (SHIC) and Sahara India Real Estate Corporation (SIREC) were two businesses that weren’t listed on any stock exchange. Over the course of two years, these businesses raised $24,000 crore through private placements of OFCDs from 3 billion investors.
- Per SEBI regulations, an IPO may be open for a maximum of 10 days, and a private placement may include a maximum of 49 participants.
- As a result, the Supreme Court of India heard the case and sent it to the Securities Appellate Tribunal, which ruled that the corporation must return the investors’ money. Due to the company’s failure to comply, serious measures have been taken against it and its top executives.
- Furthermore, the company has been unable to furnish the legitimate details of the investors to SEBI, raising suspicions of money laundering
Introduction to the Subrata Roy Sahara Group Scandal
In India, corruption is now seen as an unpleasant but inevitable cost of doing business, and corporate and political panjandrums steadfastly subscribe to this line of thinking.
The strong political-corporate relationship that exists in India facilitates this type of widespread deception. Due to intense political pressure, market authorities like the Securities and Exchange Board of India (SEBI) are ultimately helpless to exert stringent control over financial institutions.
Sahara India Real Estate Ltd. v. Securities Exchange Board of India relates to the authority and jurisdiction of SEBI in the situation of corporate fundraising and is regarded as one of the key instances. Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited claim to have gathered deposits from members of the general public, including cobblers, laborers, artisans, and peasants, in the form of Optionally Fully Convertible Debentures. Approximately 23 million people, many of whom were from rural areas and small towns, invested about 24,000 crores of rupees in this program. Before getting to the meat of the case, it is important to grasp what “Optionally Fully Convertible Debentures” mean.
Both parties have been involved in an active regulatory fight since 2009iii, when the Sahara Group’s actions first came under SEBI’s notice, leading up to the arrest of Sahara India Pariwar founder Subrata Roy Sahara in 2014. When they issued Optional Fully Convertible Debentures (OFCD), Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL) were accused by SEBI of fraudulently collecting investor funds. Sahara, meanwhile, disputed SEBI’s authority over the situation.
Following this, SEBI ordered Sahara to fully reimburse its investors. Sahara then appealed this decision to the Securities Appellate Tribunal (SAT)v. Sahara filed a petition with the Supreme Court in August 2012 after the SAT affirmed SEBI’s judgment, and the court instructed Sahara to return investors’ money by depositing it with SEBI. The majority of the US $3.9 billion had already been returned to investors, according to Sahara, with the exception of a pitiful US $840 million that it had given to SEBIvi. SEBI rejected this and stated that no information regarding the investors who received refunds had been given. The Supreme Court of India issued an arrest warrant when Sahara failed to deposit the remaining funds with SEBI and Subrata Roy skipped his hearing which made the Supreme Court of India to issue the arrest warrant against Subrata Roy Sahara.
Sahara adamantly refuted all accusations and persisted in defying SEBI amid allegations of the laundering of illicit funds and the improper use of political ties. The regulator persisted throughout what the Supreme Court described as an absurd game of cat and mouse, and in 2014viii, they were able to apprehend Sahara CEO, Subrata Roy Sahara. In this unusual win, SEBI not only successfully prosecuted Sahara but also persuasively demonstrated why the regulator—and others like it—need more autonomy and sanctioning authority.
IPO and DRHP
Initial Public Offering (IPO) refers to the first time a firm raises capital through the stock market. And getting SEBI’s consent comes before that. A corporation must submit a Draft Red Herring Prospectus (DRHP) to SEBI for this reason. Draft Red Herring Prospectus:
What is it?
It resembles a company’s bio-data and includes practically all of its information. Following this, SEBI examines the company’s DRHP and makes a determination regarding whether to approve the company or not.
An extra note
|IPO (Initial Public Offering):|
Initial Public Offering (IPO) is the term used to describe the process by which private businesses offer shares to the general public in order to raise equity funding from retail investors. A privately held company becomes a public company through the IPO process. This technique also offers savvy investors the chance to generate a sizable return on their investment.
If you are a knowledgeable investor, investing in IPOs may be a wise decision. However, not every new IPO is a fantastic chance. Benefits and dangers are mutually exclusive. It’s crucial to comprehend the fundamentals before jumping on the bandwagon.
What is IPO in Stock Market?
Initial Public Offering, or IPO. Initial Public Offering (IPO) is the procedure through which a private business or organization can go public by offering investors a portion of its stock.
An IPO is typically started to inject new equity capital into the business, to make it simple for existing assets to be traded, to raise money for the future, or to monetize investments made by current stakeholders.
The prospectus contains information about the first sale of shares that can be accessed by institutional investors, high-net-worth individuals (HNIs), and the general public. The extensive prospectus contains information about the anticipated offerings in great detail.
Once the IPO is done, the shares of the firm are listed and can be traded freely in the open market. The stock exchange imposes a minimum free float on the shares both in absolute terms and as a ratio of the total share capital.
Forms of IPO
There are two typical IPO kinds. It is the
First, a Fixed Price OfferThe issue price that some businesses set for the initial selling of their shares is known as a fixed price initial public offering (IPO). The price of the stocks that the corporation decides to make publicly available is disclosed to the investors.
Once the issue is resolved, the market’s demand for the stocks can be determined. If investors participate in this IPO, they must make sure they apply for the shares at the full price.
The offering of a book in the event of book building, the company launching the IPO provides the investors with a 20% price band on the equities. Before the final price is established, interested investors place bids on the shares. Here, the investors must state the number of shares they plan to purchase as well as the price per share they are willing to pay.
The floor price of a share is the price at which it trades, and the cap price is the price at which it trades. Investor bids ultimately determine the price at which shares will be sold.
Benefits of Making an IPO InvestmentThe benefits of investing in an initial public offering are as follows:
Higher RecognitionThis positive aspect of an IPO wins out when the pros and negatives are considered. It helps management become a trustworthy organization, which enhances management’s reputation and credibility.
Publicly traded companies often have greater brand recognition than their private rivals. A successful approach also garners media interest in the financial industry.
Access to FinanceA company can never receive more funding than it does when it goes public. The significant capital available could materially alter a company’s direction of growth. Following an IPO, an ambitious firm might experience unprecedented levels of financial stability.
This choice can aid R&D, finance capital expenditures, pay off debt, create facilities, hire new staff, and buy new technology, among other things.
Opportunity for DiversityWhen a company becomes public, investors can trade its shares on an exchange. No one investor controls a majority of the company’s outstanding stock, increasing investor diversity. Therefore, buying stock in a publicly traded company can aid in the diversification of investment portfolios.
Administrative discipline Going public incentivizes managers to put profitability ahead of other goals like growth or expansion. Because they cannot conceal their problems, it also makes engagement with shareholders simpler.
Third-Party ViewpointAn organization that goes public obtains an objective viewpoint on its business model, marketing plan, and other elements that can prevent it from becoming profitable.
Problems with IPO InvestingBefore beginning to invest in an IPO, an investor should take a few things into account:
IPOs can be very expensive. In addition to the ongoing expenses associated with regulatory compliance for public companies, the IPO transaction process requires capital investments in an underwriter, an investment bank, and advertising to make sure everything goes smoothly.
Less IndependenceRather than the CEO or president, public firms are run by a board of directors, which answers to the shareholders. The board retains the final say and the power to dismiss CEOs, including those who created the company, even if it has delegated responsibility to a management team to supervise daily business operations. Some companies get around this by granting their founder veto power when they go public.
Extra Stress Publicly traded companies are under intense pressure to maintain their stock values at high levels in the midst of market volatility. If their risky actions cause the stock price to drop, executives might be unable to continue making them. This periodically sacrifices long-term planning for the sake of the now.
Any adult who is of legal age and is able to form a contract is qualified to qualify for a company’s initial public offering (IPO). There are also certain more unavoidable standards that an investor must adhere to.
The prerequisites are as follows:
The investor who wants to purchase a share in an IPO must possess a PAN card issued by the nation’s Income Tax department. Additionally, one needs to have an active demat account. A Demat account serves the same purpose as a trading account, which is not necessary. However, an investor will want a trading account if he plans to sell his stocks through listings.
|DRHP (Draft Red Herring Prospectus):|
Before beginning an initial public offering (IPO), a firm must submit the DRHP, or Draft Red Herring Prospectus, to the Securities and Exchange Board of India (SEBI). The activities, finances, promoters, and plans for the raised monies are all covered in detail in this document.
An initial document that a business creates when it intends to go public through an initial public offering (IPO) is known as a Draft Red Herring Prospectus (DRHP). The SEBI has received this paper for assessment. It gives a summary of the company’s operations, significant risks, financial statements, and the intended use of the raised funds.
However, neither the price nor the anticipated quantity of shares is mentioned. The company can complete the DRHP and turn it into a Red Herring Prospectus (RHP) when SEBI analyzes it and offers its observations.
For instance, if a business XYZ decides to go public, their DRHP would outline key financial information, the business strategy, potential risks, and the intended use of the revenues from the IPO.
Describe a prospectus.
A prospectus is a legal document that is published by businesses that are selling securities. It is intended to give prospective investors comprehensive information on the company, including its operations, financial statements, offering specifics, management team, and any potential legal issues.
The structure of a typical prospectus includes the following:
An overview of the company information on the offering risk factors business description financial data management and corporate governance legal and regulatory aspects
A Red Herring Prospectus: What Is It?
A corporation may provide a prospectus to the public called a Red Herring Prospectus (RHP), which lacks information on the number or cost of the securities being offered. Potential investors can learn about the business operations, financial situation, and future goals via this paper. After the book-building process, this information is incorporated, and the document is then considered the finished prospectus.
Let’s say ABC Ltd. is preparing to do an initial public offering. It initially submits a DRHP to SEBI that includes information on company finances, operations, risks, and intended use of the IPO proceeds but omits information about the price or total number of shares to be issued. SEBI examines the DRHP and offers its conclusions. After responding to these concerns, ABC Ltd. completes the document and turns it into an RHP. Then, this document is sent out to prospective investors for comments. When the book-building procedure is finished, the final price and share count are added, and the document is then referred to as the final prospectus.
Advantages Of Red Herring Prospectus Draft
By providing thorough corporate information, the Draft Red Herring Prospectus (DRHP) encourages transparency and assists in making educated investment decisions. It builds investor confidence through its thorough disclosure, which represents the company’s openness. Furthermore, submitting the DRHP guarantees adherence to the standards established by SEBI, India’s market regulator.
Transparency: The DRHP offers comprehensive details about the company’s financial standing, operational effectiveness, and business model. Investors are able to make wise selections because of this transparency. Investor Confidence: The DRHP’s thorough disclosure builds investor trust because it shows that the company has nothing to conceal.Regulatory Compliance: SEBI requires the DRHP to file as part of its regulations to make sure that the company is abiding by the standards established by the regulatory body. For instance, when the well-known Indian startup Zomato submitted its DRHP in 2021, it provided detailed information about its business operations, financial situation, and future goals, which aided investors in making wise choices.
How long does SEBI take to approve the DRHP?
Depending on how complicated the case is and how well the DRHP is disclosed, the approval procedure can take a few weeks to a few months. Additionally, SEBI may ask for clarification or more data, which could prolong the procedure. In accordance with SEBI regulations, it must submit its observations 30 working days after obtaining the DRHP. However, if SEBI has any questions or needs more information, this time frame might be extended.
What Does DRHP Mean? The phrase “Red Herring” comes from the red warning label that was first placed on such prospectuses in the United States, which said that the document was still in the “draft” stage and that certain material could be inaccurate or subject to change.
Who develops DRHP? The company planning to go public consults with its registered SEBI merchant bankers when creating the DRHP.
What Causes DRHP Filing? To notify SEBI of the company’s intention to go public, a DRHP is submitted. Additionally, it offers a thorough overview of the business’s operations, financial situation, and future goals. Before clearing the IPO, SEBI conducts a thorough evaluation of the data.
What Distinguishes DRHP From A Prospectus? A DRHP is a draft document submitted to SEBI, in contrast to a prospectus, which is the main distinction between the two. In contrast, when a firm decides to offer shares or debentures, a prospectus is a final document that contains all pertinent information about the company and is made available to the public.
Sahara India vs SEBI
Sahara Prime City, a subsidiary of the Sahara Group, submitted a DRHP to SEBI for its IPO on September 30, 2009. When analyzing the DRHP, SEBI found some errors in the way the two Sahara Group companies—Sahara India Real Estate Corporation and Sahara Housing Investment Corporation—raised money. On December 25, 2009, and January 4, 2010, respectively, SEBI received accusations that SIRECL and SHICL were improperly issuing Optionally Fully Convertible Debentures (OFCDs) and raising capital. These allegations proved SEBI’s reservations to be accurate.
As a result, SEBI began looking into these two businesses and enquired about their financing strategy from Sahara India Group. At that time, SEBI discovered that SIRECL and SHICL had used OFCD to raise around Rs. 24000 Crores from 2-2.5 Crores of investors. The SEBI asserted its authority and objected, questioning why Sahara had not requested authorization from it. According to Sahara, the aforementioned bonds are hybrid products, which exempt them from SEBI’s purview and place them under the control of the Registrar of Companies (ROC), a division of the Ministry of Corporate Affairs. Before issuing the bonds, the two Sahara companies obtained permission from the ROC and filed the DRHP with it.
In response, Sahara’s two firms were given a directive by SEBI to stop raising capital through OFCD and refund the funds to investors with 15% interest. Sahara appealed the SEBI order to the Allahabad High Court. SEBI’s order was limited by the Allahabad High Court in December 2010. The aforementioned ban was lifted in April 2011 by the Allahabad High Court, and the matter ultimately reached India’s Supreme Court.
According to reports, not a single investor in either of the two Sahara entities actually filed a police report or appeared in court between the time that SEBI first began the investigation and Subrata Roy Sahara’s eventual incarceration. This also raises the potential that the Sahara Group may be laundering money on a huge scale to cover up illicit funds. The Supreme Court ordered the Group to show proof of the source of the monies used to make the alleged return payments, but the Group has not complied.
Further Proceeding on Sahara Scam in 2012-2013
The Supreme Court ordered both businesses to deposit money from OFCD holders with a 15% interest rate and SEBI within three months in August 2012. Additionally, they were required to provide SEBI with every OFCD holder’s information so that SEBI could ensure that the investors receive their money.
The SEBI office received 127 trucks from Sahara in 2013 that were loaded with cartons holding information regarding OFCD holders. Because the trucks arrived after office hours, SEBI rejected the second batch of papers, which according to Sahara contained 25% of the investor information. SEBI discovered that the files lacked accurate and comprehensive information on the investors. The possibility of money laundering was questioned.
Sahara missed the deadline by three months to deposit the money with SEBI with 15% interest. Sahara Group was required by the Supreme Court to pay in three installments. Sahara paid the first installment of Rs. 5120 Crores but not the subsequent two payments, claiming that investors had already been paid.
Only 4600 of the 2-2.5 Crore investors came up to retrieve their money. In response, Sahara India claimed that the other investors did not make a claim since they had already been compensated. Sahara India requested evidence to support this claim but was unable to do so. Additionally, they made no indication of the money’s source of funding.
By this point, the Supreme Court and SEBI both began to view it as a money laundering case. As a result, they began to freeze Sahara India’s assets as well as their bank accounts.
Timeline of Events
The unraveling of this case started in 2010 and it is still in process in the Supreme Court of India as of 2016.
- November 2010 – Securities and Exchange Board of India barred Sahara India Pariwar chief Subrata Roy Sahara and two of its companies – Sahara India Real Estate Corp (SIREC) and Sahara Housing Investment Corp (SHIC) – from raising money from the public as they had raised several thousand crores through optionally fully convertible debentures (OFCDs) that SEBI deemed illegal.
- December 2010 – Sahara appealed in the Allahabad High Court, which ordered SEBI not to take any action until a court order is passed.
- January 2011 – Delhi High Court issued a warrant against Sahara India Pariwar chairman Subrata Roy Sahara, and four other officials of the group on a complaint that it deceived investors in a proposed housing project of Rs. 25,000 crores.
- February 2011 – Delhi High Court stays proceedings against Sahara India Pariwar chairman Subrata Roy Sahara, and four other officials of the group on a complaint that it deceived investors in a proposed housing project.
- May 2011 – Supreme Court of India asked Sahara India Real Estate (SIREC) to furnish the format of the application for its optionally fully convertible debenture (OFCD) scheme and a list of accredited agents that raised money on the company’s behalf.
- June 2011 – SEBI ordered Sahara firms to immediately refund the money collected through its sale of OFCDs.
- October 2011 – Securities Appellate Tribunal (SAT), set up by the Supreme Court, ordered two unlisted Sahara group companies to refund within six weeks about Rs. 17,656.53 crores with 15% interest, which it had raised through OFCDs.
- November 2011 – Sahara India Pariwar moved the Supreme Court against SAT’s order and the Supreme Court stayed the SAT order and asked the two companies to refund Rs. 17,400 crores to their investors and asked for the details and liabilities of the companies.
- January 2012 – Supreme Court gives three weeks time to Sahara India Pariwar to choose between options to return investments made by the public in its OFCD scheme. Sahara to either give sufficient bank guarantee or attach properties worth the amount raised through OFCDs.
- May 2012 – Supreme Court is informed by senior counsel Fali Nariman of Sahara India Real Estate Corp that SEBI could not have taken up this issue of Sahara Group of companies raising funds through OFCD as there was no complaint from any investor.
- June 2012 – SEBI informed the Supreme Court that the real estate division of Sahara India Pariwar had no right to mobilize Rs. 27,000 crores from investors through OFCD without complying with the norms of the market regulator – SEBI.
- August 2012 – Supreme Court directed Sahara India Real Estate Corporation Ltd. (SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) to refund over Rs. 24,400 crore to its investors.
- February 2014 – Subrata Roy Sahara was arrested by Uttar Pradesh police for failure to appear before the Supreme Court.
- March 2014 – Subrata Roy Sahara, along with two other directors of Sahara, was sent to Tihar jail.
- March 2015 – Supreme Court stated that the total dues from Sahara have gone up to Rs 40,000 crore with the accretion of interest.
- July 2015 – SEBI canceled the license of Sahara’s mutual fund business.
- May 2016 – Subrata Roy Sahara was released on parole from Tihar jail.
- January 2021- Delhi High Court has allowed Sahara Credit Co-Operative Society and Saharayn Universal Multipurpose Society to continue their operations by staying the orders of the central registrar of cooperative societies and the Department of Agriculture, Cooperation, and Farmers Welfare. While giving relief to Sahara Group, the divisional bench also noted that a payment of Rs 17,487.82 crore has already been made.
Sebi-Sahara case: How it all began
A seemingly innocent complaint made by a man named “Roshan Lal” four years and four months prior prompted the watchdog Sebi to investigate “various illegalities” the Sahara group had engaged in when raising more than Rs 24,000 crore from more than three lakh investors.
Subrata Roy Sahara, the flamboyant head of the Sahara Group who refers to himself as the “Managing Worker” of his corporate empire, was arrested on Friday as part of the high-profile scandal, which has witnessed many spectacular events thus far. Sahara Group, which asserts to have a net worth of over Rs 68,000 crore and assets worth over Rs 1.5 lakh crore, has made numerous passionate pitches.
In the Sebi-Sahara case, Sahara dispatched 127 trucks filled with 31,669 cartons totaling more than three crore application forms and two crore redemption coupons to the Sebi office, collecting more than Rs 24,000 crore from three crore individuals.
According to reports, this caused a significant traffic bottleneck outside of Mumbai, where the regulator’s headquarters are located. The case has also brought up a number of acronyms from the financial world, like OFCDs, DRHPs, and RHPs, as well as a number of individuals with innocent-sounding names like Kalawati, Hardwar, and the well-known “Roshan Lal.” On September 30, 2009, the group’s real estate endeavor Sahara Prime City submitted a Draft Red Herring Prospectus (DRHP) to Sebi.
A corporation must submit this initial document to Sebi in order to launch an IPO, or initial public offering, of shares to the general public. Sebi became aware of certain significant fund-raising efforts by two Sahara companies—Sahara India Real Estate Corp. (SIRECL) and Sahara Housing Investment Corp. (SHICL)—while reviewing this DRHP.
Soon after, on December 25, 2009, and January 4, 2010, respectively, Sebi received two complaints stating that these two firms had issued specific bonds, known as OFCDs (Optionally Fully Convertible Debentures), to the general public across the nation for many months via illegal ways. Roshan Lal filed the second complaint, which Sebi received via National Housing Bank. Based on these grievances, Sebi started asking the group for explanations, first through their investment bankers Enam Securities, and then directly. Further investigations found that the funds were raised through OFCDs after filing RHPs (Red Herring Prospectus) with the Registrar of Companies, although the rules required permission from Sebi for any issuance of securities to 50 or more investors. In these cases, the number of investors ran into crores.
On November 24, 2010, Sebi ultimately issued an interim order ordering the two entities to return the investor funds. On June 23, 2011, the regulator issued a final order, despite the group’s appeal to the Securities Appellate Tribunal. On October 18, 2011, the Tribunal affirmed the Sebi decisions and ordered the businesses to reimburse more than three crore investors for Rs 25,781 crore.
The group subsequently filed a petition with the Supreme Court, which also issued a historic ruling on August 31, 2012, directing the two companies to deposit a balance of more than Rs 24,000 crore with Sebi so that investors can receive their money back. Additionally, Saharas were required to submit the names and contact information of every investor to Sebi, which was tasked with refunding the funds following an authenticity check. The Supreme Court issued a new judgment on December 5, 2012, directing the two firms to deposit the money in three installments, starting with an immediate payment of Rs 5,120 crore, in response to a second petition from Sebi accusing the group of disobeying earlier orders. While the group made the first payment on time, it missed the deadlines for the next two payments and instead claimed to have already given the investors more than Rs 20,000 crore. Unconvinced by Saharas’ assertions, Sebi filed orders on February 13, 2013, to seize the group’s bank accounts and other assets. Later, it summoned Subrata Roy Sahara and the other three directors to appear before it personally.
On April 10, 2013, Subrata Roy Sahara and others went before Sebi, and Subrata Roy Sahara is famous for telling reporters that Sebi’s staff did not even serve him tea. The long-running conflict over Sahara Prime City, whose intended IPO had triggered it, was finally resolved by Sebi in the same month, April 2013. Sahara Group continued to publish full-page and multi-page newspaper advertising at this time, claiming to have settled the majority of its remaining debts to bondholders. The group claimed in these advertisements to have raised a total of Rs 2,25,000 crore since its founding in 1978 across a variety of industries, and it estimated its overall net worth at an astounding Rs 68,174 crore and the value of its assets at Rs 152,518 crore. Additionally, Sahara claimed that Sebi was making “baseless allegations” against it and that it had rejected “60 truckloads of documents.” Sebi responded to these claims by claiming that the documents that Sahara had provided were “hopelessly mixed up.” Additionally, Sebi published notices in newspapers warning consumers and investors not to do business with Saharas.
In addition to writing to district collectors and other authorities to request the attachment of land, real estate, and other properties, the regulator also requested that several financial institutions, including banks, freeze all of the group’s accounts. The tax division as well as other organizations like the Enforcement Directorate received correspondence of a similar nature. Later, Sebi started a process to reimburse real investors the Rs 5,120 crore that Saharas had placed. However, it doesn’t seem as though much progress has been made in the process as Sebi has discovered instances of several accounts and is asking the Supreme Court for clarification.
The case involving Subrata Roy and the Sahara
Recently, the Patna High Court issued an order against Subrata Roy Sahara, the head of the Sahara, because he missed the deadlines for his physical appearance. Get more information about the Subrata Roy Sahara case.
The Patna High Court ordered the director-general of police (DGP) of Bihar to physically present Sahara head Subrata Roy Sahara before the court on May 16 at 10:30 am on Friday (May 13, 2022). The Delhi police commissioner and the DGP for Uttar Pradesh were both urged by the court to work together on the case.
“It seems that Subrata Roy Sahara has no respect for the orders of this Court and he thinks that he is above it,” the court stated in its judgment. He was offered several chances, but he never showed up. This Court must direct the authorities to physically present Subrata Roy Sahara in this Court on May 16 (Monday) at 10:30 a.m.
The statement said, “The DGP of Bihar would cooperate with the Commissioner of Police, Delhi, and the Director-General of Police, Uttar Pradesh, in this matter. The office is required to immediately inform the Bihar DGP, Delhi Police Commissioner, and Uttar Pradesh DGP of this order in order to ensure compliance.
The Kokilaben Dhirubhai Ambani Hospital and Medical Research Institute was the petitioner, and the court stated, “We have studied the certifications granted in the petitioner’s favor dated May 3, 2022, which has not been indicated the date of surgery. The Sahara facility certificate is likewise unclear, and if this type of certificate is approved, no elderly citizen in the nation will appear before any court. Sahara Hospital is a facility that Subrata Roy Sahara owns and controls. In the current case, where businesses run by Subrata Roy Sahara, the Chairman of the Sahara Group, have stolen millions of rupees from the people of Bihar, the court’s order is in the interests of justice.
The court added that forcing the petitioner to present was never its goal. Subrata Roy, the head of Sahara, was supposed to show court on Thursday to explain how he would refund billions of rupees to investors and then be given one more day.
The unraveling case was initiated in 2010 and is currently pending before the Indian Supreme Court as of 2016.
Final Court Order on Sahara Scam
Subrata Roy Sahara, the chairman of the Sahara Group, was detained on the Supreme Court’s orders on February 26, 2014. The Enforcement Directorate accused Sahara Group of money laundering in November 2017. Sahara Group has long operated a dubious enterprise. But this time, they’ve actually come into view.
This concludes the account of the Sahara Scam. The Sahara Group had previously been exposed for engaging in unlawful activity. Sahara India Financial Corporation, a part of the Sahara Group, was prohibited from issuing new deposits by the RBI in 2007–2008 after being found engaging in unethical behavior. But Sahara failed to learn from the mistake and ultimately pulled off a massive fraud. I hope you find the article interesting; if so, please tell a friend about it. Please leave a remark if you have any questions at any time. We will answer with pleasure.
Imprisonment and Arrest
The Supreme Court of India issued an arrest warrant for Subrata Roy Sahara on February 26, 2014, for failing to show up in court about the company’s inability to return investors’ money. After a dispute with the market regulator (SEBI), he was subsequently taken into custody at the request of the Uttar Pradesh Police on a Supreme Court warrant on February 28, 2014. On March 4, Subrata was taken in the case and lodged at the city’s Tihar Jail.
The Supreme Court of India rejected his request for bail and determined that he could only be released after collecting part of the investors’ remaining sums. In the end, the Supreme Court granted him interim bail on the 26th of March with the condition that he deposit $10,000, however, Subrata did not deposit the required amount and is currently in prison.
Subrata Roy Sahara Must Pay 62,600 Crore To Avoid Jail, According To SEBI’s Regulator
Tycoon Subrata Roy Sahara has been ordered to pay 62,600 crores ($8.43 billion) immediately, otherwise, the Supreme Court would revoke his parole if he doesn’t comply, according to a plea filed by the Securities and Exchange Board of India (SEBI).
According to court documents reviewed by Bloomberg, the markets regulator stated that the total outstanding liabilities of the two businesses that make up the Sahara India Parivar group and the group’s leader Subrata Roy Sahara is 62,600 crore, including interest. Since Subrata Roy Sahara was told to pay $25,700 crore eight years ago, his liabilities have exploded.
In 2012, the Supreme Court declared that Sahara group firms had raised more than $3.5 billion illegally and in violation of securities rules. According to the companies, money was raised in cash from millions of Indians who were unable to use banking services. When Sahara businesses failed to make payments and SEBI was unable to find the investors, the court jailed Subrata Roy Sahara.
In a statement sent through email on Thursday, Sahara Group said that SEBI’s demand was “completely incorrect.” According to the statement, SEBI “mischievously” added 15% interest, and because the companies have already repaid the investors, it is a case of double payment.
In the third-largest economy in Asia, Subrata Roy Sahara’s story is one of many about business tycoons who failed to make their debt payments. Roy’s case was included in the Netflix series Bad Boy Billionaires. Subrata Roy Sahara, who once owned an airline, a Formula One franchise, a cricket team, opulent hotels in London and New York, and financial firms spent more than two years in prison before being released on parole in 2016.
Subrata Roy Sahara has so far deposited over ₹ 15,000 crore, SEBI said in the court filing. The court has not yet decided when the case will be heard next.
Where is Subrata Roy Sahara now?
Subrata Roy Sahara was detained in Delhi’s Tihar Jail since he did not show up for court throughout the ongoing legal dispute; he has been released on parole since May 2016. Sahara was given permission to sell a portion of its Indian holdings in order to acquire some of the needed funds.
Playing political role again: Subrata Roy Sahara is quietly meeting key political players in UP
Raj Babbar, an actor-turned-politician, attended a meal that was both uncommon and potentially politically significant shortly after being asked by the Congress leadership to lead the party in Uttar Pradesh.
Naresh Agrawal of the Samajwadi Party and Kapil Dev, a former cricketing legend, were also present. Subrata Roy, the head of Sahara India, was the one who made the dinner meeting so intriguing, though. Subrata Roy Sahara invited Babbar, Agrawal, and other visitors over for a chinwag that went long enough for people to stay on and have supper. Subrata Roy Sahara was out on parole and was required by the Supreme Court to make significant payments and scrutinize properties up for sale.
For this story, the Indian media house ET spoke with several political figures, current and former bureaucrats, and Roy’s close friends. A lot of them chatted informally. Roy’s staff reported that he was unwilling to comment.
The Sahara boss, who was imprisoned on the instructions of the SC in the case of suspected investment fraud, is also tight with Pramod Tiwari, a well-known Congressman from UP. Babbar and Rajya Sabha MP Tiwari attended the funeral of Subrata Roy Sahara’s mother. According to UP lawmakers, Subrata Roy Sahara and Tiwari have been close for a very long time.
Subrata Roy Sahara is a friend of mine, and as a nonpolitical individual, he gets along with everyone, Tiwari told ET. I’m a resident of Lucknow, where the Sahara is situated.
Roy’s buzz is independent of the Supreme Court case’s developments. According to officials with knowledge of the situation, documents found during an Income Tax search on Sahara locations in the National Capital Region (NCR) in November 2014 appeared to demonstrate linkages between Sahara and leaders that crossed party lines.
The papers’ contents have been hotly debated in Delhi’s political circles. ET was unable to independently confirm the information provided in those documents. Officials stated that inquiries are ongoing. But those papers, if they hold up to closer inspection, will show you Roy’s network of links to political figures, a senior member of Delhi’s political establishment noted.
Working such connections will form the basis of everything Subrata Roy Sahara does in UP. And one of the relationships worth noting is that between Subrata Roy Sahara and Pramod Tiwari of the Congress.
According to a senior corporate executive who spoke to ET, Tiwari’s daughter Aradhana Mishra had been a Sahara group “associate”. She is currently a UP Congresswoman. Ambika Mishra, Aradhana’s spouse, is the owner of the construction company Ambalika Constructions. According to the company’s own website, it has a wide range of business relationships with Sahara.
ET called and left messages for Aradhana, but she didn’t answer.
Tiwari claimed to ET that he was “unaware” of Roy’s publicly expressed opinions against Sonia Gandhi’s “foreign origins.” Subrata Roy Sahara is also friends with senior Congress members, some of whom served as ministers in the Congress-led governments from 2004 to 2014, according to people familiar with the complicated crosscurrents of UP politics.
An SP leader noted that despite Subrata Roy Sahara receiving harsh treatment from the court and the putative victims of the alleged fraud being small investors, hardly any powerful politicians came out against Roy. The leader remarked, “That was one indicator that he still has clout.
Years spent cultivating a personal rapport with key political figures have given them that influence.
Politics in Sahara Group
Atal Bihari Vajpayee represented the BJP in Lucknow during the general elections of 1996. Naturally, he prevailed. Raj Babbar of SP, who was then a director of the Sahara India Group, was the main rival, though. Around 3,000 Sahara employees participated in the campaign, and Subrata Roy Sahara had publicly endorsed Babbar.
13 Sahara staffers were detained by the UP Police on suspicion of election fraud. The FIR included Roy’s name. He and his business have vehemently refuted all allegations.
But Sahara’s alleged sway was sufficient for Kalyan Singh, a former BJP chief minister of Uttar Pradesh, to write a letter to the chief electoral commissioner at the time, TN Seshan. Then Seshan requested that the police look into the situation.
In a twist that’s very Subrata Roy Sahara, Seshan, post-retirement, joined Sahara as a director.
However, no one should assume that because of the 1996 incident, Roy and BJP couldn’t be buddies. Roy’s aircraft was available for the BJP to use when the then-UP governor spectacularly ousted the Kalyan Singh administration in 1997, and 222 MLAs were flown down as a show of force in front of Delhi’s Rashtrapati Bhavan using Roy’s aircraft.
According to a senior BJP official, Roy refused to agree when Kalyan Singh asked but consented when Rajnath Singh called. There is a widely known anecdote in UP that Roy convinced Surendranath Awasthi, a Congress MLA and a supporter of the late Congress leader Jitendra Prasada, to give up his Haidargarh, Barabanki seat for the then-BJP chief minister Rajnath Singh. This story was relayed to ET by an old Congress hand in UP. The office of Singh declined to respond.
The BJP leader who was originally mentioned claimed that everyone was “surprised” at Roy’s level of influence. Subrata Roy Sahara had invited Vajpayee and Rajnath Singh to supper when Vajpayee formed his first, 13-day-long administration in Delhi.
Kalyan Singh, however, was not a guest. According to BJP leaders, Kalyan Singh and Roy were never friends. Subrata Roy Sahara was a buddy to many, Singh himself has previously told ET.
Many people visited his home. Only I was the exception, according to Bas Main Nahin Gaya. While the Sahara head is friendly with various politicians, according to Yogi Adityanath, a BJP MP from Gorakhpur, where Subrata Roy Sahara originally began, his influence on the BJP should not be exaggerated.
“Who cares if he used his jets to transport BJP legislators? So what if he lent his jet to BJP MLAs? That doesn’t imply the Kalyan Singh administration was saved by him, Adityanath added. “Iska yeh matlab nahin ki unke karan Kalyan Singhji ki sarkar bachi.” The Gorakhpur MP, though, has kind words for Subrata Roy Sahara as well: “He has established a good cooperative structure and he has helped the state’s development. This must not be disregarded.”
Before his legal issues became a problem, Subarata Roy held his last significant party in 2013, and according to UP political sources, important visitors included Sushma Swaraj, Arun Jaitley, Sheila Dikshit, Pratibha Patil, Meira Kumar, Digvijaya Singh, and Farooq Abdullah. The guest list was not independently verifiable by ET.
Subrata Roy Sahara: How a Financial Empire Fell Apart Due to Itself and its Impact on Indian Stock Market
Can you recall the time when the Sahara Group’s name was placed on the jerseys of the Indian cricket team? The Blue T-Shirt was once a popular fashion item, known for its bold color. However, the name “Sahara” has since become associated with controversy.
The Sahara Group is a privately held business; it is not listed on any stock exchange in India or anywhere else in the globe. Because of this, information on the Sahara Group’s stock performance before and after the hoax is not publicly available.
The controversy did, however, have an effect on the larger Indian stock market. Investor confidence in the Indian banking system was negatively impacted by the news of the scheme and the ensuing court dispute. The stock market was unstable, and some investors were reluctant to put money into Indian businesses, especially those with a track record of breaking regulations.
The Sahara Group’s role in the fraud also damaged the group’s and its businesses’ reputations. The incident damaged the group’s reputation and forced it to sell some of its assets in order to raise money to pay back the investors.
The tale is still unfolding!
A story in the Economic Times (2021) claims that SEBI (Securities and Exchange Board of India) has cash worth a whopping Rs 24,000 crore—more than $3 billion—lying idle.
Sahara has objected to SEBI’s requests for further deposits, claiming that they are unjustified. Is it true, though? Numerous investors are still waiting for their money to be returned, and the longer this situation persists, the more harm it does to India’s already shaky financial sector. What then is the answer? One thing is certain: this story is far from over. Only time will tell.
The Sahara scam is a cautionary tale of greed, deceit, and the importance of regulation. It highlighted the need for stronger regulation of the financial sector in India and the need for stricter enforcement of the existing regulations. It also underscored the importance of investor protection and the need to ensure that investors’ interests are safeguarded. The Sahara Group’s investors may have suffered financial losses, but the lessons learned from the scam will help prevent future financial scams and protect investors from fraud.
Sahara India Money Refund Status 2023
On Monday, June 20, the Securities Appellate Tribunal’s decision to stay its order requiring Sahara India Life Insurance Company to transfer its life insurance business to SBI Life Insurance Company was challenged in court by the Insurance Regulatory and Development Authority of India (IRDAI).
The Insurance Regulatory Development Authority of India’s (IRDAI) Solicitor General, Tushar Mehta, informed a vacation bench presided over by Justice Surya Kant that the SAT stay could affect the servicing of Sahara policyholders and asked for an immediate hearing on the subject. However, the magistrate ruled that the matter was not urgent and ordered that it be heard on July 3 as scheduled.
The insurance regulator claimed that its order of June 2 to immediately transfer the life insurance business of the Sahara firm to SBI Life was passed due to the former’s rapidly deteriorating financial position and as the prudential regulator being seized of the company’s state of affairs. By transferring its life insurance business to another fit and proper i.e.
SEBI has ultimately issued refunds for a total of 17,526 bondholders who were qualified for a combined value of 139.07 crores through NEFT/RTGS (to the specified account numbers and IFSC codes). This was done on the basis of a variety of documents.
This conglomerate was founded in 1978 by Subrata Roy Sahara, and it has its headquarters in Lucknow, Uttar Pradesh, India. The top 10 people on India Today’s 2012 High and Mighty Power list included Subrata Roy Sahara. In spite of himself, India still called him a “Treasure Hunter.” The business strategy for Subrata Roy Sahara’s company lists a number of subsectors, including infrastructure, finance, entertainment, healthcare, insurance, retail, education, electric automobiles (Sahara evolves), artificial intelligence, etc. The company sponsored and owned a large number of sports teams as a significant sports promoter in India. Sahara India also made a significant impact on the Indian entertainment sector.
Sahara earned the confidence of major international players by holding a stake in a Formula One racing team and committing to purchase a controlling interest in New York’s Plaza Hotel. Additionally, it became a household name in India thanks to its title sponsorship of the Indian National Hockey Team and Cricket Team. What happened to cause the company to be listed among India’s biggest con artists? Why does Sahara owe the public such a large sum of money? Here, we’ll talk about Sahara’s frauds from up until 2011 and the most recent information about Sahara India in 2022.
How much has Sahara India Group already paid investors (2020-2021)?
On the occasion of the 42nd Foundation Day, Subrata Roy Sahara said that although he has always followed the tradition of timely payments, payments had been delayed for the past seven years because of “undesirable circumstances.”
He added that, in accordance with a ban imposed by the Supreme Court, all assets (mortgaged or sold) had been deposited in a Sebi-Sahara account. We cannot use even a single rupee from this for organizational purposes or to pay the distinguished investors, Subrata Roy Sahara added.
According to Subrata Roy Sahara, “certain agreements have been reached that will resolve Sahara’s issues by this year, 2020,” keeping in mind the Supreme Court’s instructions.
A cheque for INR 41.59 crore rupees was also deposited in late January, bringing the total amount deposited by the Sahara group to INR 15,448.67 crore as on February 1, 2020. A total of 19,560 applications totaling 53,361 bond certificates worth INR 81.3 crore were submitted to SEBI. Anurag Thakur, Minister of State for Finance, disclosed that SEBI has already returned a total of INR 109.86 crore to 14,146 applicants for a total of 34,499 certificates.
As the money was only intended to pass via SEBI, SEBI published advertising inviting investors to request refunds. The final advertising was distributed during the month of June 2018, informing individuals that the deadline for submitting refund claims was July 2, 2018, and that no claims would be processed beyond that date.
Sahara Group on the Refund Procedure:
In his letter to investors in 2020, Subrata Roy Sahara noted that approximately INR 23,000 crores had already been deposited into the Sebi-Sahara account. However, SEBI could only repay the investors of both Sahara companies—Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC)—a little over INR 129 crores after nearly 9 years of orders.
Sahara Group claimed in 2021 that SEBI was “unreasonably holding INR 25,000 crore of Sahara and its investors” despite the fact that roughly INR 25,000 crore (with interest) had already been transferred into the Sahara-Sebi account.
Sahara said that SEBI stopped accepting refund forms as of July 2018 in reaction to the newspaper advertisements the organization had placed. “This enormous sum of money is sitting inert in the banks, which is detrimental to Sahara as a commercial organization as well as to the economic prosperity of our country, especially in these trying times of economic recession,” the Sahara Group alleged.
“In this way, the Sahara sustains about 14 lakh people in their own cities and villages. After Indian Railways, it has the second-highest human capital in the nation. The organization might have used this money to create additional jobs and work, which would have helped the nation’s economy, according to the report.
The Supreme Court has designated Justice (Retired) B.N. Agarwal to monitor its proceedings in this matter, according to SEBI’s annual report for 2020–2021. Furthermore, the court receives regular updates and reports for information. As of March 31, 2021, SEBI had provided the Supreme Court with 22 status updates regarding the Sahara case. In order to get more clarification on the situation, SEBI also submitted an Interlocutory Application to the Supreme Court on October 21, 2021.
Status of Sahara India Investors’ Refunds in 2022:
According to the most recent Sahara fraud 2022 update, SEBI has finally returned 17,526 bondholders who were entitled to a total of 139.07 crores via NEFT/RTGS, based on a variety of papers, to their individual account numbers and IFSC codes. Additionally, more steps must be taken before the Supreme Court.
The following are some of the most current updates on the Sahara India Scam: Various sources have reported various actions done to advance the Sahara refund case.
The Sahara India fraud was brought up in the state assembly by BJP MLA Navin Jaiswal. In his statement, he claimed that the poor had contributed more than 25,000 billion rupees (INR) to Sahara programs and are now having problems getting their money back. He requested that a hotline for Sahara scam victims be set up. Rameshwar Oraon, the state of Jharkhand’s minister of finance, stated that they are keeping an eye on the issue and trying to help the victims.
The team at Sahara India is under a lot of stress. In order to convey their letter, numerous Sahara employees and agents met with Branch Narayan, MLA for Bokaro and head whip of the BJP. As a result of Narayan’s initiative, he had already written to the SEBI chairman, Union finance minister, and Prime Minister Narendra Modi to inform them of the situation facing the workers at Sahara India.
A solicitor for SEBI named Pradeep Kumar revealed how much had already been paid out to investors and that the Supreme Court had been asked to take additional action regarding the use of the cash.
The High Court has asked SEBI to either show proof of a Supreme Court ruling forbidding the use of such funds or make sure that all Sahara investors are paid back.
Investors with mature deposits who have not yet received a refund from Sahara Group may file applications along with their claim documentation, according to previous directives by the High Court. There have been several applications submitted.
Sahara India Latest Update
This is the information you need to hear if you put your hard-earned money in Sahara India Group and feel stuck right now. The case relates to the public offering of Optionally Fully Convertible Bonds (OFCDs) by Sahara India Group to about three crore investors. Sahara India issued securities without following the rules intended to safeguard the interests of investors. Sahara India was required by SEBI in 2011 to return all investor cash, although many depositors still haven’t received their money as of this writing.
The government is fighting the problem with tough measures and doing everything in its power to refund every investor’s money. Sahara India had already sent newspaper letters to all investors informing them of the payback, but nothing happened. The High Court recently instructed Sahara India to submit a proposal for the interest-bearing return of investor deposits. For breaking the SEBI Act, Subrata Roy Sahara, Sahara India Real Estate Corporation (SIRECL), Sahara Housing Investment Corporation (SHICL), and three other people were fined a total of Rs. 12 crores.
Recently, a consumer group in the Bihar province of Gopalganj demanded that Sahara repay all maturing investor deposits with 9% interest.
Subrata Roy Sahara-What is an Investor Fraud or a Scam?
When someone tries to con you into investing money, that is investment fraud. They may encourage you to make investments in securities such as stocks, bonds, notes, commodities, money, or even real estate. You might be told lies by a con artist or given false information regarding a legitimate investment. Alternatively, they can invent a false investment opportunity.
The perpetrators of investment fraud may pose as telemarketers or financial counselors. They exude charm, intelligence, and friendliness. They can claim that you need to act quickly on a business opportunity. They work to gain your confidence in order to obtain your quick and uncomplicated payment.
In general, a scam is referred to as a dishonest plot, illegal conduct, or fraudulent action. The scam has a more detailed definition in the legal system. Essentially, it refers to intentionally using deception or dishonestly robbing someone of a legal right. Scams are also referred to as “white-collar crimes,” which refer to offenses with elements of dishonesty, secrecy, and breach of trust that are typically conducted by business professionals for financial benefit. Fraud comprises both civil and criminal components, each with its own set of punishments. For instance, a fraud that causes financial injury to a person would result in civil culpability as opposed to one that ends in breaking the law.
Subrata Roy Sahara- What are some common Investment Scams?
- Affinity fraud is when con artists attempt to defraud members of a group that has come together because of a shared trait, such as age, ethnicity, or religion. To gain the trust of the group leader and its members, con artists pose as members of the group. The con artists believe that if the group leader invests, other members would follow suit.
- High Yield Investment Programs: Scammers promise that if you invest with them, your investments would yield high returns. They claim that you will definitely profit from your investment. Frequently, these investments are fraudulent or are actually sales of worthless equities.
- Pyramid Schemes: Con artists will claim that a modest investment will result in a substantial return or profit. But you also need to locate other investors. Your “profit” is basically just the money that other investors paid you. When the con artist runs out of new investors or steals all the money and flees, the scheme fails.
- Ponzi Schemes: A con artist, typically a portfolio manager, promises to invest your money and make you a significant profit. However, the money you receive is basically just what other investors paid. When the con artists are unable to locate new investors willing to lend them money, the operation collapses.
- Pump and Dump: Scammers purchase inexpensive stocks and misrepresent their value to prospective buyers in order to drive up the price of the stocks. You can decide to pay more for the stocks because you believe they are a wise investment. Stock price declines after the con artist sells it off at a higher price, leaving you with worthless stocks.
- Recovery Room Schemes: Scammers claim they can assist you in recovering money you’ve lost to other investment schemes, but they demand payment upfront. They don’t do anything after you pay them.
- Financial products that are inappropriate for you: A financial advisor can try to sell you something that brings in a lot of money for them but is not a wise investment for you. It may take a long time for financial products like annuities to generate the income that was promised. Additionally, you can be required to pay a hefty fee if you want to withdraw your money. More generally, some financial consultants might charge you for services or goods that you didn’t request.
Subrata Roy Sahara- Causes of Scams
There are numerous reasons why fraudsters engage in such criminal activities on several platforms, including banks and financial institutions, corporate governance, stock markets, and technology, aside from the fact that scams are considered crimes and are done with malice. The desire for social acceptance and media attention are two examples of certain psychological elements. The majority of con artists have a plan to target those who are emotionally weak when it comes to their investments. They disregard standard due diligence and background checks because their desire for exclusivity and status consumes them. Most targets are blindsided by fraudsters’ abuse of their position of authority because they see them as influential and powerful. The Indian financial sector and banks are regularly targeted because procedures and rules are not followed, there is poor corporate governance, and there is inadequate supervision. One of my most frequent problems with scams is the fact that they have been carried out in every system they have targeted because of flaws in that system.
Subrata Roy Sahara- What is Money Laundering?
Money laundering is the illicit practice of disguising huge sums of cash obtained through criminal activity, such as the financing of terrorism or drug trafficking, as coming from a legitimate source. The technique “launders” the money, which is thought to be dirty as a result of the illicit action, to make it appear clean.
Both white-collar and low-level criminals use money laundering, a serious financial crime.
Anti-money-laundering (AML) rules are in place at the majority of financial institutions today to identify and stop this behavior.
- Money laundering is the criminal practice of disguising “dirty” money as legitimate rather than having been obtained illegally.
- To make money that has been obtained unlawfully appear legitimate, criminals employ a wide range of money-laundering strategies.
- Cryptocurrencies and online banking have made it simpler for crooks to move and withdraw money covertly.
- The fight against money laundering has spread internationally, and one of its current objectives is the financing of terrorism.
- Additionally, the financial sector has put in place a comprehensive set of stringent anti-money laundering (AML) controls.
Subrata Roy Sahara- How to Combat Money Laundering
The goal of anti-money laundering (AML) is to strip criminals of the proceeds from their illicit businesses, removing their primary incentive to carry out such evil activities. Millions of individuals throughout the world are put in danger by illegal and risky operations like drug trafficking, people smuggling, funding of terrorism, smuggling, extortion, and fraud. These activities also have a significant negative social and economic impact on society. In light of the fact that money laundering serves to legitimize the proceeds of such crimes, the fight against money laundering may significantly benefit society by reducing criminal activity.
Subrata Roy Sahara- How is Cryptocurrency used in Money Laundering?
Convertible virtual currencies, or CVCs, are another name for cryptocurrencies, and the U.S. Financial Crimes Enforcement Network (FinCEN) indicated in a study from June 2021 that they have increasingly replaced traditional currencies in a variety of illegal online activities.
CVCs are being used more frequently to layer transactions and conceal the source of money obtained from criminal activities, in addition to becoming the main method of payment for online purchases of ransomware tools and services, online exploitative content, drugs, and other illegal commodities. Criminals use a variety of cryptocurrency-based money-laundering methods, such as “mixers” and “tumblers” that disrupt the link between the address (or “wallet”) sending cryptocurrency and the address receiving it.
Subrata Roy Sahara- Bottom Line
Fraudsters have the possibility to perpetrate crimes because of legal loopholes. Even while changing and updating legislation to reflect societal changes is not the sole solution, such frauds show how frequently agencies fail to take their obligations seriously and arbitrarily abuse their authority. Although it can be difficult, these activities can always be corrected provided there is strict oversight that complies with all legal requirements. There is accountability where there is responsibility, and that would guarantee that all precautions are being taken to prevent any such abnormalities.
The Sahara hoax serves as a warning about greed, dishonesty, and the value of regulation. It emphasized the need for more stringent implementation of current legislation as well as for better regulation of the financial industry in India. It also emphasized the significance of protecting investors and the requirement to guarantee that their interests are protected. Investors in the Sahara Group may have lost money, but the lessons acquired from the deception will help stop similar schemes in the future and shield investors against fraud.