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PROJECT WORK
ON
CORPORATE SOCIAL IRRESPONSIBILITY TOWARDS
INVESTORS - A CASE ANALYSIS OF SAHARA GROUP
SUBMITTED TO:
AMITY LAW SCHOOL, AMITY UNIVERSITY

BY
SUBMITTED BY –
RITHU VANTHIKA J(A3256120067)
KUMAR DHRUVA - A3256120082
UNNATI BALYAN - A3256120085
ASHISH KUMAR PANDEY (A3256120105)
DEEPALI GUPTA - A3256120107
SURBHI AGGARWAL- A3256120109

UNDER GUIDANCE OF
Mrs MONICA SURI
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AMITY LAW SCHOOL, NOIDA

AMITY UNIVERSITY UTTAR PRADESH
AMITY LAW SCHOOL, NOIDA

PROJECT TITLE: CORPORATE SOCIAL IRRESPONSIBILITY

TOWARDS INVESTORS - A CASE ANALYSIS OF SAHARA GROUP
PROGRAMME: LL.B, 3rd YEAR, 5th SEMESTER
NAME OF STUDENTAND ENROLLMENT NO:
RITHU VANTHIKA J(A3256120067)
KUMAR DHRUVA - A3256120082
UNNATI BALYAN - A3256120085
ASHISH KUMAR PANDEY (A3256120105)
DEEPALI GUPTA - A3256120107
SURBHI AGGARWAL- A3256120109
.
BATCH :2020-2023
NAME OF GUIDE : Mrs MONICA SURI
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DECLARATION BY THE STUDENTS

We hereby declare that the matter in the project work titled

“CORPORATE SOCIAL IRRESPONSIBILITY TOWARDS
INVESTORS - A CASE ANALYSIS OF SAHARA GROUP”
submitted to Mrs MONICA SURI, professor at Amity Law School,
Noida, Amity University, Uttar Pradesh, is a Bonafide and genuine
work done under the guidance of Mrs MONICA SURI. The work
done in the report is original and has not been submitted earlier for the
award of any degree, diploma, or fellowship, or any other university
or institution.

STUDENT’S NAME AND ENROLLMENT NUMBER:

RITHU VANTHIKA J- A3256120067
KUMAR DHRUVA - A3256120082
UNNATI BALYAN - A3256120085
ASHISH KUMAR PANDEY- A3256120105
DEEPALI GUPTA - A3256120107
SURBHI AGGARWAL- A3256120109
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ACKNOWLEDGEMENT

We would like to express our special thanks and gratitude towards our
professor Mrs MONICA SURI, as well as other staffs of Amity Law
school who were involved in this project paper, who gave me the
golden opportunity to do this project on “CORPORATE SOCIAL
IRRESPONSIBILITY TOWARDS INVESTORS - A CASE
ANALYSIS OF SAHARA GROUP” it helped us gather lots of
information about which we were totally unaware of prior to the
project work. we would really like to thank them for this.
Secondly, we would also like to thank our parents and friends who
helped us a lot in finalizing this research paper within the limited time
frame.
Thanking You!
RITHU VANTHIKA J(A3256120067)
KUMAR DHRUVA - A3256120082
UNNATI BALYAN - A3256120085
ASHISH KUMAR PANDEY (A3256120105)
DEEPALI GUPTA - A3256120107
SURBHI AGGARWAL- A3256120109

INTRODUCTION
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A pivotal day in Indian history was February 26, 2014, when the Hon'ble Supreme Court of
India issued a non-bailable warrant against Subrata Roy, the head of Sahara India Pariwar.
What makes this fairly ordinary corporate scam extraordinary and outrageous is the fact that
the perpetrator of this Rs 25,000 crore fraud had to face the repercussions of his actions,
which is unusual in India for corporate crimes. Despite tremendous political pressure and
operational limitations, the Securities and Exchange Board of India (hence referred to as
"SEBI") won a five-year judicial struggle against the corporate giant. We have seen an
ongoing regulatory struggle between the SEBI and the Sahara group over the past ten years. 1
The SEBI became aware of the fraud when it discovered that Sahara had been issuing
Optionally Fully Convertible Debentures (hereafter referred to as "OFCD"), which had
allowed the company to collect vast sums of money. Its business practises were already being
looked into by numerous departments. This made it possible for SEBI to obtain it. The
Securities and Exchange Board of India (SEBI) ordered Sahara to fully compensate each of
its investors. The Securities Appellate Tribunal confirmed SEBI's ruling after Sahara
appealed the decision there. Sahara then appealed to the Supreme Court, which confirmed the
decision of SEBI. Later, Sahara claimed that it had already settled with the vast majority of
its creditors on its own. It generated a modest profit for SEBI and the remaining investors.
SEBI disputed this once more and demanded the names of the investors who had received
refunds. Shortly after the Supreme Court issued an arrest warrant on Subrata Roy, Sahara
skipped his hearing and failed to submit the necessary documentation or deposit the
remaining funds. Subrata Roy was then taken into custody.

ABOUT SAHARA

Located in Lucknow, Sahara India Pariwar is a business. In Gorakhpur, where he resides,

Subrata Roy established it in 1978. His company first concentrated on getting the public to
invest in order to raise money from them. The Sahara India Pariwar Group of Companies was
established as his business grew. The group was headed by Mr. Subrata Roy. 2 His main
business interests are in the areas of banking, infrastructure, and housing, as well as in media
and entertainment, consumer products, and information technology. The business has been a
significant sports investor for many years and is the official title sponsor of India's national
cricket team. The business employs around 1.4 million individuals across 5,000 locations
throughout India.The company is privately held. Having an unreported source of funding is
one of several accusations, along with money laundering, phoney investors, and fictitious
shares. Since this company had grown so big in such a short time, the Revenue Department
had been keeping an eye on it. The aforementioned fraud was first discovered in 2009–2010.

BOARD OF DIRECTORS
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Boards Of Director of Sahara India Real Estate Corporation Limited And Sahara Housing
Investment Corporation Limited

1)Subrata Roy Sahara:

He is the Sahara Group of Companies' chairman and managing director. On June 10, 1948, he
was conceived by Chhavi and Sudhir Chandra Roy in Araria, Bihar. Subrata Roy Sahara has
received numerous awards for his outstanding work in the country's various industries,
including the ITA - TV Icon of the Year (2007), Global Leadership Award (2004),
Businessman of the Year Award (2002), Best Industrialist Award (2002), National Citizen
Award (2001), Karmaveer Samman (1995), Udyamshree (1994), Baba-ERozgar (1992), and
Noble Citizen Award (1986).
2)Ashok Roy Choudhary:
He is registered with the Ministry of Corporate Affairs (MCA), and his DIN is 00180901.
Since 29 February 2008, he has been on the boards of Sahara India Real Estate Corporation
Limited and Sahara Housing Investment Corporation Limited, respectively.

3)Vandana Bharrgava:
Her DIN is 00076909, and she is officially registered with the Ministry of Corporate Affairs
(MCA). Since 28 January 2008, she has been on the boards of Sahara India Real Estate
Corporation Limited and Sahara Housing Investment Corporation Limited, respectively.

4)Ravi Shanker Dubey:

He is registered with the Ministry of Corporate Affairs (MCA), and his DIN is 00097186.
Since 28 January 2008, he has been on the boards of directors of Sahara India Real Estate
Corporation Limited and Sahara Housing Investment Corporation Limited, respectively.

BACKGROUND OF THE CASE

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An Indian conglomerate with its main office in Lucknow, Sahara India Pariwar has business
ventures in manufacturing, information technology, consumer goods retail, media &
entertainment, infrastructure & housing, finance, and media & entertainment. Subrata Roy
launched Sahara India Pariwar in Gorakhpur in 1978. 4 799 establishments are run by the
group under the Sahara India brand. Sahara India Real Estate Corporation Limited (SIRECL)
and Sahara Housing Investment Corporation (SHICL), two of the conglomerate's
subsidiaries, acquire and develop land for residential housing developments in India. The
Subrata Roy-led Sahara India Pariwar was found to have violated the Supreme Court of
India's order to repay investors' money plus interest in the Sahara India Pariwar investor fraud
case after a protracted legal battle with the Securities and Exchange Board of India.
Previously, from April 25, 2008, until April 13, 2011, SIRECL and SHICL solicited investor
subscriptions for Optionally Fully Convertible Debentures (OFCDs). During this time, the
company's total sales exceeded Rs 17,656 crore. The money was raised under the pretence of
a "Private Placement" from over 30 million people without following the regulations that
apply to public sales of securities.
When SAHARA claimed to have gathered money totaling roughly Rs. 24,000 crores from an
estimated 3 crore investors, all through the para-chit banking money method, SEBI then
seized Sahara. SAHARA claimed that the investors' funds occasionally ranged from Rs. 2000
to Rs. 20,000. In the meantime, SEBI prohibited the aforementioned two businesses from
raising money through the issuance of Optionally Fully Convertible Debentures in Nov 2010.
(OFCD).

FACTS OF THE CASE

 The Sahara India Financial Corporation was prohibited by the RBI from soliciting
new deposits in 2008. Sahara's empire's expansion was never fully understood, and
many people thought it was a Ponzi scheme that took money from investors. For the
organisation to remain afloat, it required a constant supply of new monies. The group
need a financial instrument that would be outside of the authority of the RBI but still
have access to public monies because RBI had made it impossible for the group to
receive deposits from the public.
 Sahara chose to launch two firms, Sahara Housing Investment Corporation and Sahara
India Real Estate Corporation, to issue OFCDs (SHIC). It was necessary for these
investment vehicles to be cleared by the Registrar of Companies (ROC).
 To begin with, the issue is a public one because of its enormity. Any business that
wants to raise capital from more than 50 people must first get SEBI's clearance and
then comply with all SEBI regulations regarding disclosures. Nearly 30 million
investors were contacted by the Sahara organisation to provide funding. Other than
the amount and number of investors, having the offer open ended was an intentional
mistake; in ideal circumstances, such issues should be closed within six weeks. In
actuality, a Sahara group business held onto a 17.250 billion rupee issue for ten years.
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 Sahara could have kept on producing money if it hadn't made yet another costly error.
Sahara chose to use Sahara Prime City to raise money by using the stock markets. The
company was required to reveal the workings and financials of other group companies
and to submit a Red Herring Prospectus in order to do so. At this point, Indore-based
CA became aware of SIREC and SHIC and discovered that the funds raised through
OFCDs were being passed off as private placements.
 CA discovered that despite collecting money, the Sahara group companies did not
keep accurate records on the identities of their investors. Then, how and to whom
would they repay the funds? Even seasoned search firms failed to find the investors.
 CA said that the two businesses intended to transfer funds among their group firms.
Cheques were requested in the name of Sahara India even though the OFCD
instruments were issued in the names of the two entities.
 • The Sahara Group filed a complaint with the Securities Appellate Tribunal after
SEBI published its ruling on the wrongdoings of the Sahara Group on June 23, 2011.
(SAT). But SAT believed that the SEBI findings were accurate. In its ruling, the SAT
stated: "The information memorandum (Red Herring Prospectus) failed to disclose
that the OFCDs were being offered to more than 30 million people, and therein lay the
trap." The controversy's core is actually addressed by this concealment, which is of
great significance.
 • Sahara Group then petitioned the Supreme Court; however, in August 2012, the
court requested that the group repay more than Rs 24,000 crore to SEBI within 90
days. The money will subsequently be given to genuine investors by the regulator.
However, Sahara announced all of the debt had been paid off over the course of the
previous year, with little over Rs 5,000 crore remaining.
 During the hearing in October, the Supreme Court made it clear that it was no longer
amused by the Sahara group's delay strategies and would imprison the group's
officials until the payments are completed. The Supreme Court Bench had stated that
earlier instructions had not been followed, and as a result Roy and the directors had
been called to account for the hold-up. The non-bailable warrant was issued with an
instruction to appear in court on March 4 since Roy failed to show up.

VARIOUS JUDICIAL RESPONSES DURING THE CASE

Aamby Valley property in Pune was put up for auction on the court's instruction, and the
Securities and Exchange Board of India (Sebi) had filed the top court to have the Sahara
Group accused of blocking the process. The Sahara Group is said to have been "obstructing"
the Sebi by purportedly suspending activity, and the Sebi brought the matter before a court
presided over by Justice Ranjan Gogoi for an urgent hearing.
2010 NOVEMBER: Sebi prohibited Subrata Roy and two of its businesses, Sahara Housing
Investment Corp. and Sahara India Real Estate Corp., from raising any money through the
issuance of securities.
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2010 DECEMBER: Sahara filed an appeal with the Allahabad High Court, which instructed
SEBI to hold off till a court order is issued.
2011 JANUARY: The Delhi High Court issued a warrant for Subrata Roy and four other
company officials in response to a charge that the group misled investors in a Rs 25,000 crore
projected housing project.
2011 FEBRUARY: The Delhi High Court stopped legal action against Subrata Roy and four
other company officials after receiving a complaint alleging that the organisation misled
investors in a proposed housing project.
2011 MAY: The optionally fully convertible debenture (OFCD) scheme application structure
and a list of authorised agents that raised money on SIREC's behalf were both required by the
Supreme Court.
2011 JUNE: Sahara businesses were required by SEBI to immediately return any funds
received from the sale of OFCDs.
2011 OCTOBER: Two unlisted Sahara Group entities were ordered by the Supreme Court-
established Securities Appellate Tribunal (SAT) to return about Rs 17,656.53 crore with 15%
interest that they had raised through OFCDs within six weeks.
2011 NOVEMBER: The Supreme Court stayed the SAT ruling, ordered the two businesses to
refund their investors Rs 17,400 crores, and demanded the specifics and liabilities of the
corporations after Sahara appealed the SAT order.
2012 JANUARY: The Supreme Court grants Sahara three weeks to select one of several
options for returning public investments made in its OFCD plan. Sahara must either provide a
sufficient bank guarantee or seize assets equal to the sum raised through OFCDs.
2012 MAY: Senior attorney Fali Nariman of Sahara India Real Estate Corp informs the
Supreme Court that there was no investor complaint, hence SEBI was unable to investigate
the Sahara Group of Companies' use of OFCD to raise capital.
2012 JUNE: The real estate branch of Sahara India Pariwar was not authorised to raise Rs
27,000 crore from investors through OFCD, according to SEBI, which informed the Supreme
Court of this.
2012 AUGUST: The Supreme Court mandated that the Sahara India Real Estate Corporation
Ltd. (SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) pay back more
than Rs. 24,400 crore to their investors.
2014 FEBRUARY: For failing to appear in court in relation to the Rs 24,000 crore deposits
his business refused to refund to its investors as per a Supreme Court judgement, Subrata Roy
was ordered to be arrested by the court.
2014 MARCH: Subrata Roy was jailed at Tihar along with two other Sahara directors.
2014 AUGUST: SEBI has requested that the court appoint a receiver to sell Sahara's assets
and raise the necessary funds. The court has been taking money in instalments from the
group.
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2014 OCTOBER: When Sebi asked those who had purchased bonds issued by the companies
to retrieve their funds, they discovered that just roughly 4,600 investors in two Sahara Group
entities had done so.
2015 MARCH: According to the Supreme Court, the total amount owed by Sahara has
increased to Rs 40,000 crore due to the accrual of interest.
2015 JULY: SEBI cancelled the licence of Sahara’s mutual fund business
2016 MAY: Subrata Roy released on parole from Tihar jail.
2017 APRIL: After Roy and three directors of his group companies came before the SEBI
court in a case that the SEBI had brought against them, the SEBI court dismissed the non-
bailable arrest warrants against them.
2017 MAY: After submitting a request for an exemption based on a medical condition, Roy
did not show up in front of the SEBI court. However, Roy's request was denied by the special
SEBI court.
2017 JULY: The court ordered the official liquidator of the Bombay High Court to start the
first two stages of the auction procedure for Aamby Valley on July 25.
2017 AUGUST: The Supreme Court (SC) has ordered Sahara Group to deposit Rs. 1,500
billion in a special SEBI account by September 7th. The apex court had previously stated that
the Aamby Valley auction process would be halted if the business failed to make the required
payment on time.
Sahara's attorney, Kapil Sibal, requested additional time for the business to deposit the funds
and informed the court that two post-dated checks with an expiration date of November 11
will be provided to guarantee payment. The court turned down this request. The official
liquidator opened the Aamby Valley auction process to bids on August 14 with a reserve
price of Rs 37,392 crore.
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LOOK AT CONCEPTS DISCUSSED IN THE CASE

DEBENTURE
A debenture is a long-term corporate financing product that lacks any form of collateral. For
well-run companies that don't want to issue shares and lose equity, it is a funding option.
Debentures could be advantageous for organisations that don't want to pledge assets or don't
have collateral for traditional loans.
A debenture is a formal document that details the principal amount of the investment, the
interest rate, and the frequency of payments. When the debenture matures, investors often get
their principal back (i.e., at the end of its term). Accordingly, the company normally only
pays interest (calculated as a percentage of the loan amount or the certificate's face value)
during the loan period.
DIFFERENCE BETWEEN BONDS AND DEBENTURES
The basic idea underlying bonds and debentures is the same: both provide fixed interest rates
and principal repayment at a predetermined date.
Bonds: These are provided by
1. Union Government
2. State Government
3. PSUs
Whereas, Debentures are provided by the companies.
The second distinction is the various stamp duty rates imposed on each of them.
Third distinction: Debentures often offer higher interest rates than government bonds.
Government debt is more likely to be paid back, thus there is no need to entice clients with
higher interest rates.
There are two sorts of debentures based on "convertibility."
1. Convertible debentures: These are the ones which can be easily converted into shares
of the company on the expiry of xyz date.
2. Non- Convertible Debentures: These cannot be changed into shares.
Debenture holders become equity holders when they convert their debt into shares. Both debt
and equity each have benefits and drawbacks. But generally speaking, from the perspective of
the investor, debt is safer than equity.
Securities Exchange Board of India v. Sahara India Real Estate Ltd. is one of the key cases in
regards to the power and jurisdiction of SEBI in the context of corporate fundraising. In the
form of Optionally Fully Convertible Debentures, Sahara India Real Estate Corporation
Limited (SIRECL) and Sahara Housing Investment Corporation Limited assert to have
collected deposits from members of the general public, such as cobblers, labourers,
craftsmen, and peasants. Approximately 24,000 crores of rupees were invested in this scheme
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by about 23 million investors, many of them were from rural and small towns. It's crucial to
understand what "Optionally Fully Convertible Debentures" represent before diving into the
case's details.
OPTIONALLY FULLY CONVERTIBLE DEBENTURES
Debenture can be viewed as a tool used by the corporation to raise capital. For instance, a
firm X that needs money to move forward with a new idea or project may choose to borrow
money from a bank, but this raises the issue of having to pay a high interest rate and other
conditions that the company must abide by. In this situation, the business has the choice to
use debentures to solicit a loan from the general public. The fact that the company must pay
the agreed-upon sum plus interest and that the funds acquired via the sale of debentures
become a component of the company's capital but do not become share capital is one of the
significant characteristics of this type of fundraising.
As you may see from this case, SAHARA's principal defence is that SEBI lacks authority
over its OFCD investment programme because the funds were intended for "unlisted"
entities.
The new Companies Act will eliminate this ambiguity, as agreed by the government.
According to the Companies Bill 2012 (approved by the Lok Sabha), whether a business is
listed or unlisted, SEBI would unquestionably have authority over any investment
programme involving more than 50 investors.
SEBI ORDINANCE
The Securities Laws (amendment) Bill, 2013, was introduced by the government in 2013.
This was done to give SEBI more leverage over lawsuits akin to Sahara. Although it couldn't
be passed, the government opted to put the provisions into effect as an ordinance because the
situation was urgent.
The government again renewed this ordinance in March 2014.
The legislation's omissions include the following:
• It enables SEBI to look into, raid, and seize bank accounts and assets.
• If someone disobeys a SEBI order, SEBI may arrest him without first going to court.
• Any organisation that receives funding from the common man in the amount of 100
crore OR more is known as a collective investment programme. Since SEBI controls
Collective Investment Schemes, it implies that the company will fall under its purview.
Sahara claims that SEBI doesn't have jurisdiction over them since "our scheme was above
100 crore yet we are not a CIS."
• Through regulations, SEBI can further broaden the concept of collective investment
funds.
• For the exchange of information, SEBI may strike agreements with foreign financial
regulators.
• Fast track courts to expedite pending cases' trials.
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OFCD: Reason of conflict b/w ROC and SEBI

One of the biggest flaw which came into light from this scam was the lack of communication
between regulatory authorities if registrar of companies and securities and exchange board of
India. In India to raise capital, companies issue various types of bonds like corporate bonds,
convertible bonds, government securities bonds etc. the bonds in issue in this case were
Optionally Fully Convertible Debentures. OFCD are a kind of debunkers which can be
converted into shares after the expiry of the bond based on predetermined rates, if the debt
holder (investor) wishes to do so. In a simple language with the help of Section 2(19A) of
companies act, 1956 which defines the word hybrid, as any security which has the character
of more than one type of securities, including their derivates, OFCD can be concluded as
bonds which are of hybrid nature.

The issue was not the issue of the bonds, but the corruption which took place though it. As a
rule before issuing OFCD by any company, certain procedures which are intended to protect
the interests of investors, in respect of public issues needs to be followed and one such
procedure is seeking permission of the respective regulatory authorities assigned by the
statute. Here comes the authorities in focus which are ROC and SEBI. Sahara India Real
Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited
(SHIC) issued shares worth roughly Rs 20,000 crore from roughly 2.5 crore investors
between April 2008 and April 2009 by issuing OFCD. The purpose for which the bonds were
issues was to carry various infrastructural projects like constructing and modernising rail
system, bridge, airports etc.. Even though if seen from an upper layer everything seems in
order, but according the rules of granting permissions for hybrid bonds, ROC can only grant
permissions for issuing the debt instrument only upto 50 investors and beyond that number,
SEBI has to be informed and the it is the SEBI to whom the granting power is shifted upon.
This rule invalidated the arguments put forwards by the Sahara group to justify the legality of
the bonds, by proclaiming that the permission were taken by the Registrar of Companies
(ROC), under the Ministry of corporate Affairs, since the bonds are of hybrid nature, failed to
prove their points because even if the permissions was given by a competent authority but
they didn’t had the competent power to do so. Thus the permission fell in the jurisdiction of
SEBI which was not taken, due to which the bonds issued were invalidated. That’s why the
SEBI ordered the two companies to stop raising money via OFCD and return the money to
investors with 15% interest.

The case highlighted the grave issues in our system where the main question is how ROC was
able to give permission for such a huge number when it didn’t have the power to do so and
how such permissions resulting into malpractices never came into radar of SEBI, the
regulatory authority given statutory recognition in the year of 1992 created to avoid such
malpractices like illegal transactions from banks, stock price rigging, violations of listings in
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stock market, unofficial private placement in the economic environment, issue of bonds for
which permission is not granted etc..

TAKEAWAYS/LESSONS LEARNT FROM SAHARA CASE

In this lawsuit, the Sahara Group's corporate governance system and social irresponsibility
toward investors are at issue. It raises questions for both law makers and regulators.
 Firstly, can such organised activities be reliably detected, stopped, and penalised
within India's regulatory framework?
Two Sahara group firms "pre-planned an attempt" to "bypass the regulatory and
administrative power" of the Securities and Exchange Board of India, according to the court's
judgement (SEBI).

 Secondly , The case highlights the difficulty that various banking industry regulators
have in coordinating their information gathering. In 2008, Sahara's para-banking
activities were outlawed by the Reserve Bank of India. This was followed by the
divisive fund-raising effort. But even then, it wasn't until one of the group enterprises
contacted the regulator for a "legal" public issue that Sebi learned about the operation,
two years after Sahara started. Clearly, there is a lack of communication among the
many financial industry regulators. The only regular debate forum, the Financial
Stability and Development Council (FSDC), concentrates on macro-prudential
concerns. There is a need for more active coordination at the local level..

 Thirdly, Sahara claims to have 30 million members, although some or all of them may
be "fictitious." Real subscribers might not exist or they might be mixed up with
phoney subscribers. The market regulator has yet to locate investors with more than
Rs 10 crore, despite media advertisements and other laudable efforts. If the Sahara
investors are made up, another body should investigate the matter since SEBI is only
permitted to deal with actual investors. Furthermore, Subrata Roy and the other two
directors shouldn't be in jail if Sahara really did repay its investors.

 Fourthly , this case ought to act as a reminder to government agencies like the Income
Tax Department and the Enforcement Directorate to pay closer attention to the money
trail. To prevent redundancy/duplication and facilitate better resource allocation,
various regulatory bodies and enforcement agencies must take concrete action. The
Financial Sector Legislative Reforms Commission (FSLRC), a group of retired and
active bureaucrats, has been established by the government to reform and harmonise
roughly 60 financial sector laws.
Page 15 of 16

After studying the whole case here are some common factors which plays major role
in most of the fraud cases:
1. NO DVISION OF POWER: Corporate choices frequently result from the singular
viewpoints of particular people without the necessary counterbalances. If the same person
serves as chairman and CEO, they may become "overpowered" or "overburdened.".
2. FAILURE OF BOARD OF DIRECTORS: Democracy falls short of being democratic
when the democratic party decides not to be democratic. How can one consider the success of
the company when the directors themselves choose to engage in fraud and other wrongdoing?
A company's board of directors is its heart and soul. They have a responsibility to keep the
workplace's ethical and honest culture strong. they are the organization's top decision-making
body, yet if they engage in misbehaviour, are uncooperative, or are uninformed, how will the
business prosper?
3. WEAK REGULATORY FRAMEWORK”: Misconduct and malpractice are allowed
to occur due to lax or nonexistent regulation. Business expansion that is too rapid The
controversy is a result of the company's uncontrollable growth in the years before to the
governance issues, particularly through acquisitions.
4. INADEQUATE COMPENSATION SYSTEM: Governance issues are significantly
exacerbated by a remuneration structure that is both overly aggressive and overly focused on
short-term objectives. The Business Illusion of Success People inside and outside the
organisation start to think that the business is a complete success, dismissing contradictory
information and creating a sense of invincibility. "Need is the mother of invention, but greed
is the mother of corruption," pervades the internal environment. When it comes to
distinguishing between need and greed, directors have missed the boat.
Since Sahara attempted to circumvent the provisions of several laws, including the SEBI Act
of 1992 and the Companies Act of 2013, and endangered the lives of numerous investors,
many of whom belonged to the lower social classes and barely made enough money to
maintain their body and soul, I believe the Supreme Court's observation is justified from all
angles. It attempted to stake the lives of a largely illiterate group of people who have little to
no understanding of a company's financial position and are therefore unsure of how to take
advantage of schemes like OFCD, which require knowledge about the performance of the
company and rudimentary knowledge about the right time to convert such debentures into
shares that will be profitable for them. Due to their ignorance of the risk associated with such
seductive schemes, these investors risk their entire investment on the one false promise made
by the dishonest company managers. In every way, the Supreme Court's ruling will set a
significant precedent and serve as a disincentive for people to participate in such illogical
schemes.
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RECOMMENDATIONS

In India, financial fraud has been more common over the past few years and has become one
of the main obstacles keeping foreign companies from investing there, according to a recent
research by Grant Thornton and Assocham. Corporate fraud has a terrible impact on India as
its population grows and its economy develops to fulfil demand. To drastically lower the
culture of corporate scams in India, three important structural reforms may and should be
done.
Whistleblower protection laws are crucial, first and foremost. People are more likely to come
forward and voluntarily offer information if they receive some basic reassurance. Making
sure that more people are keen to provide information and shielding them from political
threats and job insecurity will increase openness in the Indian corporate sector.
Second, market and federal authorities require more autonomy than they currently have. Only
when their work is free from political interference then the Reserve Bank of India, SEBI, and
other regulators be effective.
Third and the most important point is, the need for judicial reform in India is urgent. Due to
the slow-moving nature of the court system, corporate offenders can utilise shady means to
avoid justice and unnecessary delays are created. Corporate cases, especially ones of this size,
need to be expedited to resolve promptly so violators can face harsh and immediate
repercussions.