Subrata Roy Sahara of India Sahara family is one of the most famous and influential people in rural and small-town folks in North India. His relations with politicians, Bollywood stars, and many huge personalities always kept him in the limelight. His company was the lead sponsor for the Indian national cricket team. He has received many awards from government and non-government organizations for his work.
But the things don’t matter because he was in jail for not being able to pay an amount of Rs. 20,000 crore of investor’s money which was ordered by the Supreme Court of India, is now on the payroll. He cheated approximately 3 crore investors of their money which is more than the population of many states in India. Subrata Roy started his business from Gorakhpur in Uttar Pradesh.
He mainly relied on small investors to raise capital for his businesses. His investors were mainly from villages and small towns in the nearby regions. Many of his investors were earning hardly Rs. 3,000 per month or less than that and they used to deposit Rs. 30-40 daily in their Sahara account.
This time was a time when villagers from India did not have any bank account and that’s why they don’t have any destination to deposit their small savings so, they trusted the Sahara group because the people from the group usually belongs to the same village or same region, although they provided them a small interest of 1 to 2%.
The investors used the amount from the savings in Sahara accounts to purchase some of the household goods like TV fridges or any other item for which they require more money than their monthly savings. All the things were going very smoothly but the main problem with Sahara getting started when Sahara prime city which is a real estate venture of the group filed a DRPH which stands for draft red herring prospectus with SEBI on September 30, 2009. SEBI which represents the security exchange board of India, regulates the securities of the market in India.
DRPH is an initial document that a company needs to file with the security exchange board of India to bring out any initial public offer which shares to public investors. SEBI received many complaints about the illegal ways used by two firms from the Sahara group named Sahara India real estate corp limited and Sahara housing investment corp limited in providing the certain bonds. This was a violation of the rule which says that the company has to register with the security exchange board of India before going public.
After the research and investigation, SEBI passed an interim order against the two companies on the date November 24, 2010 asking them to refund the money which was collected from investors. After this Sahara went to the court and challenged the SEBI order but Sahara lost the case. On August 31, 2012 the Supreme Court announced one of its most awaited judgments of that time and directed the
Sahara group and its two companies to refund around Rs. 17,400 crore to their investors within a time limit of three months with an interest of 15%. Then Supreme Court asked SEBI to probe into the matter and find out what happened with the investors and their money. The investigation went on the floor and it was found that from 2008 to 2011 the Sahara group had a total collection of over Rs. 17,656 crore which was collected from 3 crore investors in the form of a private placement without following the rules of public offerings of securities.
SEBI passed an order on June 23, 2011, directing the two companies to refund the money which was collected from the investors and the two companies were also restrained including Mr. Subrata Roy from accessing the securities market till further orders.The court-ordered Sahara to deposit the outstanding amount of Rs. 24,000 crore with SEBI as a refund to the investors. Sahara paid its first installment of Rs. 5,120 crore but it failed to pay the rest of the money.
On February 13, 2013, SEBI passed an order to attach the bank accounts and other properties related to the group and later issued the summons for the personal appearance of Subrata Roy Sahara and the other three directors of the group before it. In 2013 SEBI finally closed the file of Sahara prime city. Recently in the year 2018 SEBI sold about 75% stakes in Sahara in New York’s one of the most iconic buildings the Plaza hotel which belongs to the Sahara group, to arrange funds to pay back the investors.
The other properties which belong to the Sahara group were also sold to pay back the investors. A case of money laundering against Sahara was registered by the Enforcement Directorate of India as almost 95% of transactions of money between the group companies and the investors were done in cash and the respective taxes were not paid. The chief of Sahara group Subrata Roy stated in February, 2020 he said that two large foreign investors who were interested in real estate and city development business are investing Rs. 22,000 crore.
Roy has also assured all the Sahara investors that they will get their invested amount with full interest and an additional interest of even a single day delay. He said that the company has followed its tradition of timely payments and excellence in services but there has been a delay in payments in the last 7 years due to some undesirable circumstances.
Referring to the dispute between Sahara group and SEBI Roy said that the entire amount generated by the sale of the assets and the properties of Sahara group will be deposited in the SEBI Sahara account which was ordered by the supreme court and he said, out of this we cannot use even a single amount of money for organizational work for repayment of the investors.
He said that all the problems will be resolved as the two esteemed foreign investors with huge funds are coming for real estate and city development businesses. The entire case of the Sahara group and its cheating represents that the uninformed poor people can be fooled very easily when they idolize the wrong role model