CASE STUDY ON SAHARA PARIWAR SCAM. (investor fraud case)

1. *PRESENTED BY:
SUPRIYA LIMAN

2. (INVESTOR FRAUD CASE)

3.  Subrata Roy case is also called Sahara India
Pariwar investor fraud case.
 Securities & Exchange Board of India (SEBI)
case is the case of the issuance of Optional
Fully Convertible Debenture (OFCD) issued by
the two companies-SIREC & SHIC.
 The group operates more than 5,000
establishments across India with the
employee strength around 1.4 million under
the Sahara India umbrella.
 Main sponsor of the Indian Cricket Team
apparently withdraw & Hockey Team. They
own an IPL team & 42.5% stake in formula
one’s force India F1.
 The Brand Trust Report published by Trust
Research Advisory, listed Sahara in the top
100 most trusted brands of India.
Subrata Roy
Sahara, Founder,
Chairman &
Managing Worker

4. CASE INVESTOR FRAUD CASE
Industry Conglomerate
Type Private
Founded / Headquarters 1978, 41 years ago ( Gorakhpur, Lucknow,
India)
Founder / Occupation Mr .Subrata Roy (Chairman) Managing Worker
Products Financial services,
Construction,
Mass media,
Retailing,
IT services & outsourcing.
Business Interest Finance,
Infrastructure & housing,
Media & entertainment,
Consumer merchandise retail venture,
Manufacturing & information technology.
CONT…

5.  In this case Subrata Roy failed to return
Rs.24,000 crores plus interests to its
investors as directed by the supreme Court
of India.
 The case all began when a CA sent a note
to the National Housing Bank, requesting
the bank to look into the housing bonds
issued by two Sahara group companies
SIREC & SHIC.
 He found that the bonds that had been
issued to a large number of investors had
not been issued as per the rule.
 Mr Abraham who was the then Director of
SEBI was reviewing the DRHP to raise
equity for real estate company Sahara
Prime City Ltd.

6. Sahara Prime City LTD.
SIREC
( Sahara Indian
Real Estate Corp. )
SHIC
( Sahara Housing
Investment Corp. )
SAHARA COMPANIES
INVOLVED IN THE CASES

7.  In Draft Red Herring Prospectus (DRHP) said their
company as the private company but operated as the
public company.
 Took money through OFCD from more than 50
people & violating what they have written in the
DRHP.
 Never reported to the SEBI.
 Made fake investors & took money on the name of
these investors.
 Used the illegal methods such as money laundering.

8. LEGAL CASES
ON SAHARA
Money Laundering
Fictitious Investors
Dummy Shares

9.  Supreme court of India passed the judgment in favour
of SEBI.
 Ordered Sahara to repay the Rs. 24,000 Cr with 15%
interest.
 Supreme court allowed Sahara to pay whole amount in
three instalments.
 120 Cr immediately, 10,000 Cr in Jan 2013 & remaining
amount by Feb 2013.
 Sahara failed to pay second & third instalment.
 On 28 Oct 2013, Supreme court directed Sahara to
submit title deeds of properties worth Rs.20,000 Cr to
SEBI.

10.  Issue of OFCD’s is legal.
 Issue of OFCD’s is not a public issue.
 OFCD are nether shared nor Debentures but
“Hybrid” Class.
 OFCD’s are “Hybrid Instruments” cannot be
listed.
 Serious error is committed by SEBI.
 No statutory requirement to listed OFCD’s

11. There are various government and ethical issues involved
the collapse which can as follows:
Unethical
conduct
Fraud
Violation
of law
Lack of
‘independence’
of the Directors
Inadequate
role of
regulator
Lack of
transparency
Political
connections
of Roy

12.  OFCD was a public issue.
 OFCD’s were transferable securities.
 Violation of section 73 of companies Act, 1956.
 Untrue Red Herring Prospectus.
 Not following the securities contracts (regulation)
Act, 1956
 The forms issued by two companies did not enclose
an abridged prospectus.
 Did not submit Balance Sheet and Profit and Loss
account to the concerned, registrar of companies
(ROC).

13. Board of
Directors
CEO
CFO
Senior
Management
Internal
Audit
IT
Department
Middle
Management
Operational
Management

14. 28 Feb 2014 - Roy was arrested by the
Lucknow Police.
Mar 2014 - He was sent to Tihar Jail
along with two other directors of Sahara.
July 2015 - SEBI cancelled the licence of
Sahara’s mutual fund business.
May 2016 - Roy released on parole from
Tihar Jail.

15.  Remove grey areas relating to issue
by so called unlisted companies.
 Jurisdictional gap is removed
between MCA & SEBI in matters of
public interest.
 Adverse effect on reputation go
the country.
 Adverse effect on economy.
 Corruption & misuse of power.
 Lack of transparency creating
speculation.
 Effective & strict judicial. decision.
It was a huge 24,000 Cr fraud where close to 3 Cr people had invested. We
all have explained how Sahara scam was executed & how SEBI caught them.