Imperial Journal of Interdisciplinary Research (IJIR)
Vol-3, Issue-3, 2017
ISSN: 2454-1362, http://www.onlinejournal.in
Sahara India’s Downturn; A Study on
Awareness and Customer’s Perspectives
Vaishali Khandelwal
Master of Business Administration
Abstract: Customers today are more concerned
about experiencing high quality services while
investing. The expectation is not just receiving an
investment or financing offer from the financial
institutions in form of a commodity. They rather
expect the institution to have a personality of its
own with wider recognition and provide the
expected return on the financial instruments, which
delivers services in an atmosphere with
satisfaction. In the financial sector the quality of
service is turning out as an important differentiator
among the rivals.
This case is about Sahara group which did a fraud
with their investors. Company failed to comply with
a Supreme Court order in 2012 to repay investors
in the bond scheme, which the court has said was
illegal. With this regard Delhi police arrest Sahara
group owner Subrata Roy in march 2014 and to
appear in court over failure of two Sahara
companies to pay Rs 19,000 crore by way of dues
to be paid to investors.
Keywords: Banking industry, Customer
satisfaction, Financial fraud, Sahara Group.
1. Introduction
Sahara India Pariwar (founded in 1978) is an
Indian conglomerate headquartered in Lucknow,
India with business interests in finance,
infrastructure & housing, media & entertainment,
consumer merchandise retail venture,
manufacturing and information technology. The
company had an estimated market capitalization of
US$25.94 billion as of March 2011.
1.1 Sahara Fraud Case
HOW IT ALL BEGUN: January 4, 2010- Roshan
Lal, a resident of Indore sent a note 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 note, he found that
the bonds, bought by a large number of investors,
were not issued according to the rules. The national
Imperial Journal of Interdisciplinary Research (IJIR)
housing bank did not have the wherewithal to
investigate the allegation, So it forwarded the letter
to the SEBI, The capital market regulator.
1. November 2010 - Securities and Exchange
Board of India bars Sahara India Pariwar chief
Subrata Roy and two of its companies - Sahara
India Real Estate Corp (SIREC) and Sahara
Housing Investment Corp (SHIC) from raising
money from the public as they raised several
thousand crores through optionally fully
convertible debentures which SEBI deemed
illegal. December 2010 - Sahara made appeal
in the Allahabad High court which ordered
SEBI not to take any action until a court order
is passed. January 2011 - Delhi High court
issued a warrant against Sahara India Pariwar
chairman Subrata Roy and four other officials
of the group on a complaint that it deceived
investors in a proposed housing project of
Rs.25,000 crore.
2. February 2011 - Delhi High court stays
proceedings against Sahara India Pariwar
chairman Subrata Roy and four other officials
of the group on a complaint that it deceived
investors in a proposed housing project.
October 2011 - Securities Appellate Tribunal
(SAT) ordered two unlisted Sahara Group
companies to refund within six weeks about
17,656.53 crore with 15% interest which it had
raised through a flotation of OFCDs.
3. November 2011 - Sahara India Pariwar moved
to Supreme Court against SAT's order and in
favor of Sahara Group it stayed the SAT order,
and asked the two companies to refund 17,400
crores to their investors and asked the details
& liabilities of the companies. January 2012 -
Supreme Court gives three weeks time to
Sahara India Pariwar to choose between either
to give sufficient bank guarantee or attach
properties worth the amount raised through
OFCD's.
4. June 2012 - SEBI informed Supreme Court
that real estate division of Sahara India
Pariwar had no right to mobilise Rs.27,000
crore from investors through optionally fully
convertible debentures (OFCD) without
complying norms of Market regulator - SEBI.
August 2012 - Supreme Court directs Sahara
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Imperial Journal of Interdisciplinary Research (IJIR)
Vol-3, Issue-3, 2017
ISSN: 2454-1362, http://www.onlinejournal.in
India Real Estate Corporation Ltd. (SIRECL)
and the Sahara Housing Investment
Corporation Ltd. (SHICL) to refund over Rs.
24,400 crore.
5. Subrata Roy was eventually arrested on 28
February 2014 by Uttar Pradesh police on a
Supreme Court's warrant, in a dispute with
Market Regulator - SEBI. In a statement after
the arrest, his lawyer said Mr. Roy's 92-year-
old mother was in poor health and needed "her
eldest son" by her side, and hence he failed to
appear at the court. He was granted interim
bail by Supreme Court of India for the same on
26 March 2014 on condition of depositing Rs
10,000 crore with the market regulator Sebi.
As of August 2014, Roy was still in jail and
was trying to sale some of his hotel properties
to enough money.
6. September 5,2014-Sahara chief Subrata Roy
asked SC for 15 more days to sell properties
Appearing before a bench headed by Justice
TS Thakur, Roy's counsel submitted that there
have been huge protests outside the hotels after
an International newspaper published story
that Sultan of Brunei is buying the properties.
October 1,2014- Roy was sent back to his cell
in Tihar at the end of the period granted by the
Supreme Court for stay at the air- conditioned
facility in the complex to negotiate sale of his
overseas hotels. October 06, 2014-Subrata Roy
seeks restoration of special facilities in Tihar
jail .
7. October 31, 2014-Subrata Roy shelled out Rs
31 lakh to use special facilities in jail. Roy was
allowed by the Supreme Court to use the jail's
conference room to negotiate sale of his hotels
in order to collect Rs 10,000 crore for his bail.
8. And since the day of detention Subrata Roy
was in the jail until he got bail on his mother’s
demise in May, 2016.
2. REVIEW OF LITERATURE
According to (Pande, 2014) With a population of
over 1.2 billion, more than 250 million people in
India live in abject poverty. Corruption at the top
and grassroots level is at an all-time high, and GDP
growth has slowed to 4.7 percent in 2014. The
Indian economy relies significantly on the
corporate sector, and the rising number of financial
scams has pertinent ethical implications now more
than ever. The Sahara and Saradha Group scandals
represent the antithesis of all business ethics.
Sahara, for one, has been convicted of wrongfully
acquiring investor money without proper
authorization. Of course, there is the obvious issue
of misrepresenting funding activities to investors as
well as SEBI, but that is simply the tip of the
Imperial Journal of Interdisciplinary Research (IJIR)
iceberg. There is widespread speculation that the
40 million investors of the Sahara schemes were a
front made up to hide black money from influential
donors. It is hardly any secret that Sahara made it
extremely difficult for SEBI to track down
investors, not only by sending a plethora of
paperwork in 127 trucks for them to sift through,
but also by refusing to refund the money to SEBI in
the first place. Indeed, SEBI has found that the
documents Sahara provided do not provide
sufficient, verifiable information, and SEBI has
heard back from less than 1 percent of the 20,000
investors it contacted, with many addresses turning
out to be invalid.
(Kanteti, 2015) analyzed Sahara’s misdeeds are
considered as an eye-opener in several respects
about the uncertain dealings inside the corporate-
houses and it brings in to being the need for
protecting the interest of several millions of
investors, who invested their hard earned money in
such socially irresponsible corporations. SEBI
proved to be effective machinery in tackling the
case to an extent but still it has a limitation of
regulating unlisted companies in India. The reasons
for such scandals are several including lack of
transparency, weak provisions, political nexus and
above all, ignorance of investors. In the light of
Sahara case, it is the responsibility of the
government and its various agencies to protect the
interests of investors and nation as well through
putting in place necessary provisions in accordance
with the changing requirement of market.
According to (Jagannathan, 2016) The Sahara
case is getting curiouser and curiouser. Jailbird
Subrata Roy, bossman of the Sahara group, has
been in Tihar for more than two years but is
showing no eagerness to come out. The Supreme
Court is exasperated but has not found a way to
make him pay his bail amount and get out.
Politicians are quiet, despite being on bum-chum
terms with Roy. Sebi has been twiddling its thumbs
on Roy, attending court hearing after court hearing,
without anything to show for its patience. What
gives? Roy has been in jail since 4 March 2014 for
failing to comply with a Supreme Court order of
August 2012 asking him to refund over Rs 24,000
crore raised illegally by two Sahara group
companies. With interest piling up due to non-
compliance, Roy’s bill has shot up to over Rs
36,000 crore now. And counting. After failing to
pay up and evading the court’s orders for more than
18 months, an angry Supreme Court ordered his
arrest and said he could be released only on a bail
amount of Rs 10,000 crore – half in cash, and the
rest by way of a bank guarantee.
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Imperial Journal of Interdisciplinary Research (IJIR)
Vol-3, Issue-3, 2017
ISSN: 2454-1362, http://www.onlinejournal.in
(Rao, 2015) Analyzed The paper studies the Sahara
India Pariwar scam. The two companies of Sahara
group naming Sahara Group Companies Sahara
India Real Estate Corporation limited (SIRECL)
and Sahara Housing Investment Corporation
(SHIC) were raising thousands of crores from the
public without informing SEBI. The paper
discusses how these two companies could raise so
much of money without following the prescribed
rules and regulations and how did SEBI come to
know about the wrongdoings of these two
companies. I have also studied what action was
taken by Supreme Court in this particular case.
Most importantly the paper studies the corporate
governance issues in the group which lead to such
big scam.
4. RESEARCH METHODOLOGY
Research Methodology is the general research
strategy that outlines the way in which research is
to be undertaken. The following methodologies
have been adopted for this study.
4.1 Research problem
The research problem was to observe the awareness
and customer’s experience regarding Sahara India
Fraud Case.
4.2 Research Objective
 To find the most important dimensions of
service quality that affect customer
satisfaction.
 To analyze perceived responses of
customers.
 To give suggestions for good quality
services.
 To find out awareness among people for
the fraud case.
 To understand the customer’s expectations
while investing.
4.3 Research Design
This study is dependent on tangibility, reliability,
responsiveness, assurance and empathy as
evaluated by customers on quality of service, so it
is a causal research design; since it reveals a cause
and effect relationship.
4.4 Data Collection Method
The data collection method can be classified in two
parts:
Imperial Journal of Interdisciplinary Research (IJIR)
Primary Data – In this research, primary data
was collected by a questionnaire and survey
among people to find out the awareness level
about Sahara fraud case and experience of its
customers.
Secondary Data - Information that already
existed was collected in the study from the
authorized website of SAHARA and other
literature available.
4.5 Target Population:
Opinion of general public of Udaipur from
different age groups was taken.
4.6 Statistical tools:
Percentage method was used to analyze a few
open-ended questions; some of the Questions were
based on Likert scale, to analysis the respondent’s
opinion about PMJDY. Chi-Square technique was
applied to analyze a set of data.
5. DATA ANALYSIS AND
INTERPRETATION
Analysis is a process of breaking a complex topic
or substance into smaller parts in order to gain a
better understanding of it. For the analysis purpose
a complete questionnaires were used for analysis.
The results of the analysis are presented below.
5.1 Demographic Profile of the study area
74 respondents were taken into consideration for
the study out of which 47% of males while 53% of
females were part of this survey.
Most of the respondents were students i.e. 62%.
24% of the total sample belonged to the self-
employed group and 6% to the unemployed group.
5% were housewives, 2% were in agriculture and
1% was business person.
5.2 Awareness was spread among people by
these means:
Most of the respondents which is 51% became
aware through Media advertisement, 30% through
friends and relatives, 11% through Agents and
remaining 8% through other sources.
5.3 People who invested and who didn’t in
Sahara India:
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Imperial Journal of Interdisciplinary Research (IJIR)
Vol-3, Issue-3, 2017
ISSN: 2454-1362, http://www.onlinejournal.in

36% respondent or their relatives/friends invested H0 = Association between demographic factor

in Sahara India while 64% didn’t invest in Sahara
India from the total no. of People surveyed.
5.4 How many of the respondents or their
relatives got the expected returns?
income and investment decision is independent.
HA=There is association between demographic
factor income and investment decision is
dependent.

Total no. of respondents invested in Sahara India,
there were 18.6% people who got their expected
returns, 20.3% who didn’t get the expected returns
and 61.1% people who don’t have any knowledge
about their relatives/friends got the expected return
or not.
To check the significance of hypothesis we apply
Chi Square Test on the table given above and
interpret the results. If the calculated value falls
under the tabulated value then the hypothesis is
rejected and if it is more than tabulated value then
the hypothesis is accepted.

5.5 How many of investors know about Table 2

Sahara India’s Fraud case?
Income Yes No Total
The total investors among the respondents were 22 Below 5 7 12
people and 69.4% investors knew about Sahara 100000
India Fraud Case, 12.9% didn’t know about it and 1 to 3 lac 5 18 23
17.7% people didn’t have any information about 3 to 5 lac 5 7 12
their relatives/friends whether they knew or didn’t 5 to 10 lac 4 8 12
know about the Fraud Case. 10 lac & 1 2 3
above
5.6 Do People who invested in Sahara still Total 20 42 62
trust Sahara? Degree of Freedom (df) = (R-1)*(C-1)
{R=no. of rows; C=no. of columns}
There are 60.3% people who don’t trust Sahara,
19% people who still trust Sahara and 20.7%  (5-1)*(2-1) = 4
people who have no knowledge about their
relatives/friends whether they still trust Sahara or Calculation of the expected values for the table.
don’t.
E11 = (R1*C1)/N
5.7 If given an opportunity, would people {N= total sum of column values}
again like to invest in Sahara?  (12*20)/62
 3.87
59.4% investors don’t want to do it again while
14% people were highly satisfied with Sahara’s Similarly the expected values from the remaining
policies hence they again want to invest in Sahara observed values of the table were calculated. The
if given an opportunity and 26.2% people don’t table given below contains the observed value, the
know what would they or their relatives/friends do expected value and the square of their differences:
if such situation comes before them.
Table 3
5.8 Investment decisions taken by
customers are dependent on their income: Observed Value Expected ((O-E)2)/E
(O) Value (E)
Table 1 5 3.87 0.32
5 7.4 0.77
Income Yes No
5 3.87 0.32
Below 100000 5 7
4 3.87 0.004
1 to 3 lac 5 18
1 0.96 0.0016
3 to 5 lac 5 7
7 8.12 0.15
5 to 10 lac 4 8
18 15.58 0.37
10 lac & above 1 2
7 8.12 0.15
8 8.12 0.0017
The above table shows the income wise distribution 2 2.03 0.0004
of people made investment and didn’t make
investment in Sahara India from the sample size.

Imperial Journal of Interdisciplinary Research (IJIR) Page 1202

Imperial Journal of Interdisciplinary Research (IJIR)
Vol-3, Issue-3, 2017
ISSN: 2454-1362, http://www.onlinejournal.in

X2 = ∑((O-E)2)/E JOURNAL OF RESEARCH IN COMMERCE, IT &

MANAGEMENT , 100-103.
 2.0877

Hence 2.0877 is the calculated value of Chi Square. Website links:

The tabulated value at the level of significance 1%
and 5% are 13.3 and 9.49 respectively. www.ssrn.com/en/
Since the calculated value is less than the tabulated en.m.wikipedia.org/wiki/SAHARA
value the hypothesis H0 is rejected. And therefore www.sebi.gov.in
www.sahara.in
the alternative hypothesis HA is accepted.
www.dnaindia.com
Interpretation: It is evident from the Chi Square
test that the association between demographic
factor income and investment decision is
dependent.

6. CONCLUSION

As a conclusion, based on this study which reveals

that most of the people are aware about Sahara and
its Fraud case. They also know Sahara chief
Subrata Roy and have knowledge about his
detention. 36% of the respondents or their
relatives/friends invested in Sahara which shows
that Sahara’s customers can be found out easily
because its customer base was too strong, So many
people used to invest in Sahara even from low
income families also which indicates that Sahara
targeted low income group as well as high income
group. Sahara was having diversified products for
various income groups of the market. But many of
the customers didn’t get their expected returns and
the study reveals that the fraud case decreased its
popularity and people started losing their faith in
Sahara hence most of the customers don’t want to
invest again in the Sahara. And Sahara’s customers
remained dissatisfied and hurt with its involvement
in the fraud case.
And investment decisions taken by any investor
highly dependent on his income as the results
showed by chi square test.

7. REFERENCES
[1] Jagannathan, R. (2016, March 31). Why Is Subrata
Roy Not Eager To Get Out Of Jail? The Sahara Case
Gets Curiouser. New delhi, India.

[2] Kanteti, D. V. (2015). Corporate Social

Irresponsibility towards Investors- A Case Analysis of
Sahara Group. Indian Journal of Research , 198-199.

[3] Pande, A. (2014). Corporate fraud in India- case

studies of Sahara and Saradha. seven pillars institute .

[4] Rao, N. (2015). A CASE STUDY OF SAHARA

INDIA PARIWAR SCANDAL . INTERNATIONAL

Imperial Journal of Interdisciplinary Research (IJIR) Page 1203