Sahara India

January 4,2010- Roshan Lal, a resident of Indore sent a

note written in Hindi to the national housing bank,
requesting it to look into housing bonds issued by two
companies of the lucknow-headquartered Sahara group,
Sahara India real estate corporation and Sahara housing
investment corporation.
Being a CA, Lal wrote in the small note, he found that
the bonds bought by a large number of investors, were
not issued according to the rules.
The national housing bank did not have the wherewithal
to investigate the allegation, So it forwarded the letter
to the SEBI, The capital markets regulator

How it began?
In 2008 RBI barred Sahara from raising funds from the
public through debt or equity on the grounds of irregular
deposits and Non-compliance with rules.
So instead Sahara through its two unlisted SIREC and
SHIC raised rs 24000 crore issuing optional fully
convertible bonds.
later in 2010 Sahara prime city released a red herring
prospectus stating the financials of the group
companies out of which SIREC and SHIC showed various
discrepancies. when it was investigated it turned out
both the companies used illegal means to raise the
funds.

 SEBI asked the two companies to return the raised money to

the investors rs 24000 with 15% interest, to which Sahara
later filed a case in SC which was directed to securities
appellate tribunal as non listed companies jurisdiction lies
with the registrar of companies which comes under ministry
of corporate affairs.
When the order was cleared only 3254 applicants filed return
application which accounted only Rs 25.17 crore rest
investors were unknown which was suspected.
After hearing they were ordered by the SC to return the
amount In three equal installments of which 5000 crore was
paid in 2012. The company later came out with a statement
that the remaining amount was paid to the investors which
again was a lie and SC issued a warrant against the group
chairman Subrata Roy against Non- compliance. He was
arrested in 2014.

Learnings
ROC cleared the issue with asking the basic questions
like
Both the companies had negligible net worth. SIREC had
an equity capital of only Rs 10 lakh and a negative net
worth at the time of issuance while the net worth of
SHIC was around Rs 10 lakh. But both the companies
planned to raise Rs 20,000 crore each.
Any company seeking money from more than 50
persons has to take the approval ofSebiin doing so, in
which case the company would have to make all the
disclosures required as perSebinorms.
TheSaharagroup had sought money from nearly 30
million investors. Apart from the size and number of
investors, another deliberate error was keeping the

 Collected money did not have proper records of the

identity of its investors. How and to whom would they
then return the money? Even professional agencies
were unable to locate the investors.
As of today Sahara has returned more than Rs 15000
crore while 11000 crore including interest is yet to be
paid.