The Sahara Scam

The Sahara Scam – The Meteoric Rise & The Downfall Of Saharasri Subrata Roy

This blog is about the Sahara Group this time. I’m sure all of you’ve followed it. They have been sponsoring the cricket team. You’ve seen the logos everywhere. Then you would’ve seen the massive controversy which led to Sahara Sri Subrata Roy spending 2 years in jail for contempt of court for the Sahara Scam. It turns out that Sahara is this big fundraising machine, which through all this controversy starting 2010 & in fact, after 2012, even when it was in this big battle with SEBI has collected. Hold your breath. The number is mind-boggling. 1,10,000 crore.

Just by way of comparison, the Health Budget at the time of the pandemic is just about 89,000 crore. So 1,10,000 crore. 1^st taken into account 24,000 crore, which was the center of the controversy with the Securities & Exchange Board Of India. This is the money that the Supreme Court ordered him to pay back to SEBI. Subrata Roy was not able to pay the 24,000 crores. He managed to pay only 15,000 crores & which has earned interest over the last several years. So it’s a little over 20,000 crores.

The Sahara Scam – What happened ?

Now, on 18^th August, the Central Register of Co-operative Societies normally unknown to take any action. There were innumerable complaints against cooperative banks that have gone there with hardly any action. But on the 18^th of August, the joint secretary dropped a bombshell. He writes to the Ministry of Corporate Affairs asking for an investigation by the Serious Fraud Investigation Office. Also known as SFIO. He says that Sahara, through 4 multistate co-operative societies, has raised multi-state co-operative societies, multistate co-operative banks. This is all the co-operative sector dealing with some of the poorest people in the country, raising money from them.

So how did Subrata Roy made such a huge scam ?

But what kind of money ?. He says they’ve raised 86,673 crores over 10 years starting 2010. He says there are 15,000 complaints that he has received & the number of investors involved in crores. In fact, in 1 co-operative society alone, it’s 4 crores. In others, it’s several crores operating all over India. So 4 co-operative societies across India. The 1^st is Sahara Credit Co-Operative Society Limited, which is money from 4 crore depositors. How much is this ?. 47,245 crore. Mind-boggling.

These 4 crore depositors gave that money. Where did it go ?. He says they went & put it into Aamby Valley Ltd. It’s a fantastic hill station somewhere near Bombay with a golf course, with an airstrip. Money is being poured into it. It’s all private, not listed. Sahara Credit operates in 22 Indian states. As far back as 9^th December 2019. It started with a small number of complaints. Only 12 were settled out of 208 complaints. So the registrar of cooperatives should start issuing orders against them & holding hearings. In fact, at the moment, when he started hearing it, there was supposed to be a winding-up & liquidation that was demanded.

But because they said, we’ve got a website (http://sccsl.sahara.in/contact.html). We’re giving you the address here. We’ve contact details (contactus.sccsl@sahara.in). We’ve got a redressal mechanism. He gave them time. The 2^nd is Saharayn Universal Multipurpose Co-Operative Society. This is registered in Bhopal in 2014. 2014 is important because this is the time that Subrata Roy was in jail. This is a controversial time. It collected 18,000 crores & this is from 3.71 crore members.

The Scam

Again, out of this, 17,945 crores is invested in Aamby Valley. This co-operative operates in 17 states. The 3^rd is Humara India Credit Co-Operative Society. It collected 12,958 crores from 1.8 crore members. This is registered in Calcutta, operates out of 15 states & Union Territories. Even out of this, 15,000 crores, 10,255 crores was invested in Aamby Valley. On 17^th August, the regulator said the investments in Aamby Valley were against the basic principle of thrift & credit corporate society & ordered a detailed investigation. The last is Stars Multipurpose Co-operative Society (Stars). This was set up as recently as 2018.

It has branches in 14 states & it raised 8,470 crores. Of this, 6,273 crores were invested in Aamby Valley as equity in addition to advances of 1800 crore. In August, the regulator had said that noted that this company was unable to provide details of these advances of 1800 crores & he had asked the society. He has asked all these 4 cooperative societies to stop accepting the deposits because 15,000 complaints are pending in this society alone, which is the last & the smallest.

The Role of the Government & the legal system

There are 6,720 complaints. Now, add this number, along with the 24,000 & you come up with this mind-boggling 1,10,000              crore. This is happening without an investment banker, without advertisements, without any publicity, very quietly. Are we a banana republic or what ?. In between this time, Mr. Subrata Roy was sent to Tihar jail on 4^th March 2014 & remained there till 6^th May 2016 when he was let out on parole. He has remained outside because he had to attend his mother’s funeral rights. This is how India works. No further question. He is quietly raising money. There’s no stopping it.

What is interesting is that when this group you’ve heard me talking endlessly about cooperative banks that have failed. We’ve talked about PMC Bank. You would think some regulator would look at it. There was a joint parliamentary standing committee looking at Ponzi’s & cheat funds. They don’t look at this. You had all the Sarada & others failing. You had people on the street who had suicide. Sahara, which is controversial, is being heard year after year by the Supreme Court. This whole return of just 24,000, which is one-fourth the amount is being supervised by a retired Supreme Court judge. We’ve 5 regulators in the financial sector. None of them look at it. Until complaints start mounting, the 1^st suicide does happen.

The Sahara investors

15,000 crore is what they had with SEBI & 19,000 applications were requesting a refund. After all the refunds, only 100 crores had to be paid out with interest after all the refunds. So where are the investors ?. Now, even here you would have had 4 crores, 3.7 crores, 1.8 crores. Add them together that is 8 – 9 crore investors. This company or these societies have not been able to pay returns since the beginning of this year before the pandemic. Mr. Subrata Roy has been sending out mail saying SEBI money will come back, will open foreign investors. What the media has reported, nothing has happened.

Instead, we’ve had a global pandemic & a lockdown that has continued for 6 months. Sahara’s investors are strangely very, very quiet. PTI & Indian Express reported this on the 3^rd of September. Indian Express had a banner headline. All over the country reported PTI the story. After that, maybe a few people have started coming forward.

The Sahara Scam / Several questions that remained unanswered

The SFIO inquiry has not been ordered. Mr. Vivek Agarwal was the joint secretary. He has written to the Finance Ministry, Department of Financial Supervision. No answer. So written to the Reserve Bank of India. No answer. So, everybody is quiet & the investors also by & large are quiet. Mr. Agarwal is focused on what these people are doing & he has asked all of them to stop raising further money. So like I said, 62,643 crores, digest that money gone into Aamby Valley. Then another startling observation that Mr. Agarwal makes is that Sahara Credit Cooperative Society made an advance of 2,253 crores personally to Mr. Subrata Roy. This entire money he took & deposited with SEBI.

Now, what was deposited with SEBI needs to be explored because this was not supposed to come from a credit cooperative society. This was raised as optionally fully convertible debentures by 2 real estate companies. So why did he need to take a personal advance & why did he submit money belonging to those realty companies ?. There’s a Supreme Court judge retired who’s looking at it. There’s a big fat regulator called SEBI looking at it. We need answers from them. SEBI knows at least from the 3^rd of September. Will it answer ?. It’ll only answer if the government & the investors ask some questions. 3rdly, Mr. Agarwal says fictitious profits were shown in the accounts of these societies for sale & purchase of Aamby Valley shares.

Aamby Valley chaos

Now Aamby Valley is not listed. None of the companies. What we discovered is when SEBI had taken the title rights to Aamby Valley because Mr. Subrata Roy & Sahara couldn’t pay the money that they were supposed to pay. They handed over title deeds. When those title deeds were examined, they found that Aamby Valley has a bunch of companies making investments impossible to unravel. There was no clear title & no way to be able to sell it because you couldn’t sell it in parts. There were no takers. Also no buyers for the kind of price they wanted as a whole. So the title deeds were given back.

The strange silence of the Sahara investors

Now, these shares are being sold to show fictitious profits. Then they’re completely unlisted & we’ve no idea what the valuation is. Another thing that he says is the money that was raised from these people. Absolutely on the ground. We don’t know who these investors are. What we know for a fact is when it came to SEBI, the reason why there are only 100 crores returned out of 24,000 crores is because there are no more investors who are saying this is our money, this is our deposit return it to us. Here also we know 15,000 who’ve complained. But we are talking about 8 – 9 crore investors in the 4 societies together.

Their money, he says, has gone into Sahara India Commercial Corporation Ltd, Sahara Prime City Ltd, Lucknow Sahara Housing Projects, Sahara Hospitality, Sahara India Ltd, Sahara Financial Corporation Ltd. Isn’t this what an investigation ?. We don’t know because nothing has been happening. It’s all quiet. He says the deposits collected in a present, the hard-earned money of crores of Indians. We don’t know. Some of them are complaining. Hard-earned money certainly it’s. Some of them are strangely silent. Also, think of the numbers. The number of depositors by way of comparison in PMC Bank is not even 100. They’re not a crore. They’re all over the place holding protests, shouting slogans, holding placards you hardly see.

The Sahara Scam / Sahara still kept on raising money

Why are they so invisible ?. This itself requires a separate investigation. But apparently, this country does not want to investigate. Upendra Kumar Sinha, the former chairman of SEBI makes great pride in what he’s done in Sahara. So, he writes in his book that prime ministers & former finance ministers he specifically named Dr. Manmohan Singh, Mr. Chidambaram, Mr. Arun Jaitley & Mr. Pranab Mukherjee as having taken great interest & supported this investigation. The Supreme Court was looking at it. While all this is happening, Sahara was raising over 86,000 crores. There is no answer if there’s no big investigation ordered immediately.

The Sahara Scam / Sahara denies of any wrongdoing

Serious Fraud Office doesn’t want to look at it. If the tax department in the GST department goes after people like you & me to take out a few thousand rupees or a few lakhs that they claim that we may not have paid, & this big fat sum & its origins & what has been done with it’s not investigated, then we can’t say that this is anything but a banana republic. Now, what does Sahara have to say ?. PTI has written about it. Sahara has strongly refuted that it has done any wrongdoing, & it also says almost no laws apply to multistate co-operative societies, which the government needs to confirm whether that’s true or not.

Sahara has got a legal opinion from a retired judge who says that a law passed last year covers every kind of deposit-taking by unregistered companies. This is the Banning of Unregulated Deposit Schemes, Act 2019. They say it doesn’t apply to us. This means how do we make laws ?. Do we make redundant laws from the word go ?. If 1,10,000 crore can be raised & this big new legislation doesn’t apply to Sahara, who are we kidding ?. What are we making laws for ?.

Conclusion – The Sahara Scam

The Sahara Scam is 1 of the notorious & massive scams of India. We’re changing & amending laws every day in Parliament. Then we need to amend this. If you’ve brought co-operative banks under the Reserve Bank of India. Maybe multistate cooperative societies also need to be brought under the Reserve Bank of India. Or you’ve got a regulator over here who’s finally working. Let’s give him support & start an investigation. Let’s show that there’s the law of the land applicable in India.