Sahara India group’s running battle with the market regulator Sebi and protracted legal proceedings before the Supreme Court has intrigued even the most astute legal observers. Its chief Subrata Roy was sent to jail by the apex court in March 2014 following his defiance in not obeying its order to repay the proceeds of debentures issued illegally by two of its group companies, Sahara India Real Estate Corp and Sahara Housing Invest Corp. The Sebi had declared the public issues by these two companies illegal way back in August 2012.
On 6 February 2017, the Supreme Court ordered attachment of the group’s most ambitious housing project ever, Aamby Valley on the Mumbai-Pune Expressway estimated to be worth Rs 39,000 crore in order to pay off the remaining Rs 14,000 crore due to the investors. Sebi’s estimate of the dues however is about Rs 47,000 crore including interest till date.
That is perhaps why the apex court is not content with merely attaching the group’s prime property but has asked it to submit a list of unencumbered properties so that it could order auction of some or all of them to realise the dues estimated by the stock market regulator.
The apex court has been working to a game plan albeit unstated. Nobody knows under what law Roy was incarcerated though he is now on a rather long parole following the death of his mother last year. In fact the Congress spokesperson Abhishek Manu Singhvi questioned his incarceration on the ground that if he was guilty of contempt of court, he should be punished with whatever penalty or jail term prescribed and be done with. But then the Supreme Court seems to be convinced that Sahara is not an ordinary group. For too long, Sahara has had to live down its dubious reputation of money launderer to the nation.
The Supreme Court seems to know this and is applying the squeeze on it. It knows that a group moves its funds freely among its member companies which is why it has not called upon the two defaulting companies Sahara India Real Estate Corp and Sahara Housing Invest Corp alone to justice. Instead it has very wisely focused on the entire group. On the whole the apex court wants the group and its wily promoter to stew in its own juice.
It has brushed aside the plaintive plea of Kapil Sibal on 6 February 2017 that the income tax appellate tribunal has held that as many as 85 percent of the investors in these two defaulting companies were genuine. It seems to be more inclined towards the Sebi findings that bulk of their investors were benami or mere name lenders or fictitious. The group has never been able to prove with cogent evidence that it has paid back through banking channels the dues to the investors. Instead, it has been weakly quibbling that it works in rural India where cash is the king.
Kapil Sibal is right when he says there is no bank or investor asking for money. Yet, the Supreme Court is asking for money. Why? Because it presumably suspects Sahara group performing the ignoble role of a money launderer. The real owners would not want to surface. But would they be philosophical enough to kiss their money parked with Sahara goodbye? The SC wants to know the names of the group’s formidable clientele widely suspected sotto voce to include the rich and the famous (or the dubious?) drawn from politicians of all hues and persuasions, cricketers, film stars, indeed everyone who has something to hide.
This is the first major attempt at launching a frontal attack on benami the bane of the country much before the Modi government added teeth to the Benami properties Act last year. Full marks to the Sebi and the SC for persisting with their relentless efforts in making Roy sing like a canary which he might soon. It must be noted that Roy has not been set at large but only on parole. He hasn’t been able to mobilise the bail amount of Rs 10,000 crore demanded by the apex court in addition to the amount Sebi is seeking to pay off the so-called investors.
The NDA government demonetised Rs 500 and Rs 1,000 notes on 8 November 2016 to unearth black money mainly. That effort might or might not have succeeded. The jury is still out on it but the SC squeeze on Sahara is likely to land it a rich haul of money held benami. The government can under the Prohibition of benami properties act confiscate such properties. Looks like the government is going to savor first major success on this front thanks to the indefatigable zeal of the SC and Sebi.