3. ABOUT THE COMPANY
SAHARA COMPANIES INVOLVED IN THE
BRIEF ABOUT THE CASE
METHODS OF RAISING MONEY FROM THE
WHAT SAHARA DID WRONG
WHAT SAHARA , SEBI and COURT SAID
4. Sahara India Pariwar is an Indian conglomerate
headquartered in Lucknow, India.The group operates
business sectors like finance, infrastructure & housing,
media & entertainment, health care, education,
hospitality and information technology.
Founder: Subrata Roy
Founded: 1978, Gorakhpur
Key person: Subrata Roy (Chairman)
Subsidiaries: Sahara Prime City, Sahara One Media &
Type of business: Privately held company
5. SAHARA PRIME CITY LTD.
• SIRECL (Sahara India Real Estate Corp)
• SHICL (Sahara Housing InvestmentCorp)
6. To know how Sahara Scam first came on Radar of SEBI,
we will first understand about the IPO and DRHP.
IPO or Initial Public Offering is the process through which
any company offers its shares (Part of ownership) to public
(people) for very first time, so as to generate the funds. IPO
is the process through which any company gets listed on
DRHP or Draft Red Herring Prospectus is the Biodata of the
company and it contains all information of the company. It is
not a confidential document and SEBI uploads it on its
7. If any company wants to get listed on Stock Exchange
so as to generate more funds then it is compulsory for
the company to take the permission from SEBI
(Security Exchange Board of India) which is Capital
market regulator in India.To issue the permission,
company submits the DRHP to the SEBI. DRHP
contains all the information of the company like
Financial Information, Objectives, Promoters and
Management details, past performance, Capital
Structure, Issue Information etc. After deeply
analysing the DRHP, the SEBI decides, whether to
grant the permission to the company or not.
8. On 30th Sep 2009, company name Sahara Prime City
(SPC) which was the part of Sahara group of companies,
submitted its DRHP to SEBI for issuing IPO, so as to raise
the fund from public. DRHP of SPC contained almost 779
pages. But the actual jumble was on Para 49 of page no.
640. While analysing the DRHP of SPC, SEBI realised that
other two companies of Sahara Group that is SIRECL
(Sahara India Real Estate Corporation Ltd.) and SHICL
(Sahara Housing Investment Corporation Ltd.) has raised
the funds in inappropriate/illegal manner.While SEBI was
investing about it, after some days that is on 25th Dec
2009 and 4th Jan 2010, SEBI received a complaint against
these two companies saying that these companies are
issuing OFCD in wrong way.
9. OFCD means Optionally Fully Convertible
Debentures. Debenture is a Debt (loan) instrument,
using which company borrows money from people
and in return gives them interest. OFCD is a type of
Debenture in which investors has the option to
convert their OFCD to Equity and become the share-
holders of company.
If any company is issuing the OFCD to less than 50
people/investors then it is compulsory for the
company to take the permission from ROC or
Registrar of Companies. And if the company is issuing
OFCD to 50 or more than 50 people than it should
take permission from SEBI.
10. When SEBI started the investigation, it realised that the two companies
of SaharaGroup that is SHICL and SIRECL have raised the OFCD of Rs
24000 crore from 2 to 2.5 crore investors, without taking permission
from SEBI. Legally this process of issuing OFCD should be completed in 6
weeks, but SHICL and SIRECL kept on issuing OFCD for more than 2
As soon as it was exposed, SEBI banned Sahara group from issuing new
OFCD and ordered to return the money of investors with 15% interest.
But Sahara group instead of following the orders of SEBI, filed the case
against SEBI in Allahabad High Court. First, In Dec 2010 Allahabad High
Court ceased the orders of SEBI, but later in April 2011 found that SEBI
was right. Sahara lost the case in High court, but Sahara didn’t stopped
there and appealed in Supreme Court. Supreme Court suggested Sahara
to approach SAT that is Securities AppellateTribunal. Again SAT found
that Sahara was guilty and ordered Sahara to follow the orders of SEBI
and return the money of investors with 15% interest. Crossing all the
limits, Sahara challenged the decision of SAT in Supreme Court.
11. Sahara Group said that the “OFCD issued by SIRECL and SHICL are
private placements, since this OFCD’s were issued only for people
who are connected with Sahara Group and also SIRECL and SHICL
are unlisted companies, so SEBI does not have any rights to handle
On this SEBI said that “SIRECL and SHICL had issued OFCD to more
than 50 people, and hence it is public placement and not private
placement. Also they have not taken the permission from SEBI,
which is Mandatory”.
At that time, Dr. K. M. Abraham was the Board Member of SEBI
and was the investigator of Sahara Case.When he was verifying
about the details of investors of OFCD, he found that many of
investors in Sahara are fictitious, and others do not have any
relation with Sahara Group (so said by Sahara Group).
12. In Aug 2012, Supreme Court found SIRECL and SHICL
guilty and ordered them to submit the money to SEBI
that they have collected from investors with 15%
interest under 3 months and also submit all details of
investors to the SEBI so that SEBI could return the
money to the investors.
Following the orders of Supreme Court, Sahara sent
127 trucks to SEBI, which were filled with documents
containing the details of investors. But SEBI rejected
some trucks since they reached after the deadline.
After analysing the documents, SEBI said that the
details of investors are incomplete and unrealistic,
and hence this matter can be of Money Laundering.
13. August 31st ,2012 SC orders Sahara to repay
24,000 cr back to its investors
October 19th ,2012 SC clears SEBI’s action on
November 12th ,2012 SEBI began prosecution
proceedings against Sahara
November 30th ,2012 Sahara submits drafts
worth 5,000 cr in SC
December 5th ,2012 SC orders Sahara to pay
back 24,000 cr with 15% interest to over 30
14. February 6th,2013 SC tells SEBI to freeze
accounts of Sahara and seize property of Sahara
group’s 2 companies for defying court orders by
not refunding 24,000 cr to investors.
February 13th ,2013 SEBI freezes the accounts
of Sa February 25th,2013 SC refuses to give more
time to the Sahara Group to refund its investor’s
March 15th ,2013 SEBI moves SC for arrest of
April 10th,2013 SEBI quizzes Sahara chief and 3
other director sahara chief Subrata Roy.
15. May 2nd,2013 SC stays proceedings on pleas filed by Sahara
Group and Roy in tribunal and high court
May 8th, 2013 SEBI initiates process of refund to investors
on SC’s orders
October 28th,2013 SC says it cannot trust the Sahara Group
any more, and directs the company to submit title deeds of
its properties worth rs. 20,000 cr to SEBI within 3 weeks
November 20,2013 SEBI says Sahara Group has its assets
overvalued and has not submitted original title deeds of
November 21st,2013 SC bars Subrata Roy , chairman of the
company ,and three other directors from leaving the
country and asks not to sell any of its property till further
16. January 2nd ,2014 ROY fails to get permission from
SC to travel abroad to attend his business meetings
January 9th , 2014 SC warns of a CBI probe against
Sahara , if it failed to reveal the source of Rs. 22,000 cr
it claimed to have refunded to 33 million investors
February 20th ,2014 SC summons Subrata roy on
February 26th ,2014 SC issues non-bailable arrest
warrent against Roy for his failure to appear before it
in connection with the case
February 27th ,2014 Roy offers unconditional
apology for not appearing before the apex court ,
Lucknow police fails to find him at his residence
17. February 28th ,2014 Roy arrested by the
November 14,2014 while Roy still in jail,
Enforcement directorate has registered a money
laundering criminal case against the Sahara
group in connection with non payment of corers
of rupees to depositors probed by capital
market regulator SEBI.
March 23,2015 SC gave the Sahara group
90days to finalize plans to sale of properties
both abroad and in India to raise the required
fund for the release of mr Subrata Roy.
18. In DRHP said their company as the private company
but operated as the public company.
Took money through OFCD from more than 50
people and violating what they have written in the
Never reported to the SEBI.
Made fake investors and took money on the names of
Used the illegal methods such as money laundering.
NOTE – DRHP is the set of documents containing the
information about the company from financial info to
19. Issue of Optimally Fully Convertible
Debentures (OFCD’s) is legal.
Issue of OFCD’s is not a public issue.
Serious error is committed by SEBI.
No statutory requirement to list OFCD’s.
20. OFCD was a public issue
OFCDs were transferable securities
Untrue Red Herring Prospectus
Not followingThe Securities Contracts
The forms issued by two companies did not
enclose an abridged prospectus
Did not submit Balance Sheet and P&L a/c to
the concerned ROC
21. KM Abraham was one bright and diligent
officer of SEBI, it was largely due to the
efforts of this one man that bought into light
the whole Sahara scam. His investigation
clearly pointed to lack of corporate
governance at Sahara com.panies
22. Fully convertible debentures not in
Lack of independence in directors
Lack of transparency
Violation of laws
Alleged tax evasion
Political connections of Subrota Roy
23. SEBI has absolute power to investigate into the
matters of both listed companies and unlisted
It vests SEBI to investigate into any matter
concerning the interest of the investors even if it
pertains to companies which are not listed
Companies walk on a thin rope and are overtly
conscious of potential fraud as it may damage
their reputation and market capitalization.This
is an encouraging sign, which indicates brighter
future for corporate governance .