PRESENTATION ON

SAHARA SCAM
PRESENTED BY
PRAMIT MANDAL
INTRODUCTION OF SAHARA
PARIWAR
s Sahara India pariwar is an indian conglomerate in
lucknow, India
0 It has a business intrest in finanace, infrastructure and
housing, media and entertainment.
0 The company has an estimated market capitalisation
of us$25.94 billion of march 2011.
0 The group is a major promoter of sports in India such
as Indian hockey team.
0 The company owns a 42.5% stake in formula one.
 Mow Sahara falls into a touble?
s In 2010, two Sahara Group Companies Sahara
India Real Estate Corporation (SIREC) and Sahara
Housing Investment Corporation (SHIC) were
raising large sums of money -Thousands of Crores
from investors by issuing Optionally Fully
Convertible Debentures to the public.
 TRIVIA
These two companies were raising thousands of
crores but SEBI was not fully aware of why they
were doing so or what they were doing with the
collected money. Ideally speaking, before such an
issue happens, the company is expected to file a
request with SEBI, get it approved and then start
the collection of public money.
 How did SEBI find out that
Sahara was collecting public
money?
0 Mr. Abraham review DRHP, to raise equity for real
estate company Sahara prime city ltd through an initial
public offering (IPO).

0 DRHP disclose details of two associate group

companies (SIREC and SHIC) raising funds from public
through optionally fully convirtable debentures.
 TRIVIA

So, when SEBI found out that two Sahara Group

Cos were raising thousands of crores by issuing
optionally fully convertible debentures which
they were not aware of, they started digging to
find out what exactly is happening.
whflat did SEBI Do when they
found out?
SEBI asked the two companies - Sahara India
Real Estate Corporation (SIREC) and Sahara
Housing Investment Corporation (SHIC) to stop
raising money through an order dated 24
November 2010
 WHAT DID SAHARA DO IN
RESPONSE?

Sahara rushed to the Lucknow bench of the

Allahabad High Court, which stayed Sebi's order
but not its investigation. Sebi moved the
Supreme Court, but the apex court too was not of
much help. It merely directed the high court to
expedite the case. The high court vacated its stay
only on 7 April 2011, when it found that the
Sahara group was not cooperating with Sebi as it
had directed.
 What was SEBI justification to go
with the court-case route
s Sahara group challenged SEBI intrusion.

0 That SEBI is not under juridiction since they are

hybrid instrument- neither shares nor debentures.
Was this Justification True?

Of Course Not. Any market related instrument

comes under SEBIs Jurisdiction. SEBI
demolished this argument easily since they were
debentures that could be converted into shares.
This contention was later upheld by the
Securities Appellate Tribunal and the supreme
court in 2012.
 Continued WWW

Sahara's counter to the Private placement point was

- when Sahara offices and agents were busy
hawking these OFCDs, and when the two
companies SIREC and SHIC had over 6 million
investors, the offers can't possibly be considered
as a private placement.
Was Sahara Right in Excluding
SEBf.from their OFCD Issue?

Absolutely Not. Before the OFCD Issue starts,

according to the Schedule II of the Companies Act of
India, SEBI has to Review and Vet the DRHP of the
company. The Schedule also specifies that, when the
company files its DRHP, the Company Directors have
to file a Declaration saying that they have complied
with all provisions of the Companies Act and the SEBI
guideline.
 Continued...
In reality, the Directors of these 2 Sahara
companies SIREC and SHIC excluded all
references to SEBI while signing their
declarations. On top of all this, this whole OFCD
Issue had actually started in 2008 for SHIC and
the SIREC Issue had no-closing date. How can an
Issue happen which has no closing or end date?
 Why Does SEBI Have these
Guidelines?
The main reason behind SEBI Asking
companies to follow the guidelines is to protect
the Investor. If some random company starts
issuing stocks or bonds in the market and dupes
investors, who would be responsible? Ya that's
right SEBI. This is why SEBI has those
guidelines. Plus, unregulated collection of funds
from the public could result in Money
Laundering and other illegal activities which
SEBI is trying to control here...
 So, What did SEBI Do, after it
found Irregularities?

0 SEBI simply asked the following questions:

1 Why are you raising the money?

2 Who are the owners and investors in these companies
that are collecting money?
3 What do you Intend on doing with the collected
money?
4 Why did the OFCD Issue Open without the DRHP
being filed with SEBI?
Wap Sahara able to answer these "
v
questions?
a Unfortunately NO. They were not able to get straight
answers to questions 1,2,3,and 4. In fact, they dint
even have a list of Investors who had invested into the
company. To find out the names of its own investors,
SIREC actually needed the help of professional
accounting firms. If the identity of the investors and
addresses themselves are not readily available with a
company how is it practically possible that the issue
was even legit one?
lA/haLare the Courts Saying Now?

0 The courts were totally unhappy about the fact

that the Sahara Group was non-cooperative
throughout the Investigation. The Supreme
Court had directed the group to refund the
money collected by them to the Investors. Sahara
was asked to block or pledge assets worth 20,000
crores to help SEBI recover the money and
refund it to investors.
 CONCLUSION
On 26 february 2014, the supreme court of India
ordered the arrest of subrata roy, chairman and
founder of Sahara India Pariwar, for failing to
appear in connection with the rs 24000 crore
deposits his company has not refunded to its
investors. UP police on a supreme court warrant,
in a dispute with market regulator-SEBI.
 REFRENCES

0 En.m. wikipedia.com 0

Wikipedia of Sahara 0 www.

Slideshare.net-svasani
0 Saharascam - scribd
THANK YOU