sahara parivar scam

1. CASE STUDY ON SAHARA PARIVAR
SCAM
(OFCD)

2. What is a Debenture?
 A debenture is a medium to long term debt
instruments used by large companies to
borrow money, at a fixed rate of interest.
 There are two types of debentures
 Convertible
 Non convertible

3. What is convertible debentures?
 Convertible debentures, which are
convertible bonds or bonds that can be
converted into equity shares of issuing
company after a predetermined period of
time.
 When debentures is converted into shares, it
means debt holder becomes an equity holder.

4. What is OFCD?
 The Optionally Fully Convertible Debenture
is a kind of debenture which can be converted
into shares at the expiry of a certain period at
a predetermined price, if the debt holder
(investor) wishes to do so.
 OFCD are hybrid in nature and as defined u/s
2(19A) of companies act, 1956 “hybrid”
means any security which has the character
of more than one type of security, including
their derivatives.

5. SAHARA PARIVAR
INTRODUCTION:
 Type : private company
 Industry : conglomerate
 Founded : 1978
 Founder : Subrata Roy (chairman)
 Headquarters : Lucknow, India.

6. Background of Sahara case
 The case all began when a CA in Indore sent a note
to the National Housing Bank, requesting the bank
to look into the housing bonds issued by 2 Sahara
group companies, Sahara India Real Estate Corp.
(SIREC) and Sahara Housing Investment Corp.
(SHIC), having there headquarters in Lucknow. He
found that the bonds that had been issued to a large
number of investors had not been issued as per the
rules.
 The National Housing Bank did not have the
wherewithal to investigate the allegation, so it
forwarded the letter to the SEBI, the capital market
regulator.

7. Cont…….
 Mr. Abraham who was the then Director of
SEBI was reviewing the Draft Red Herning
Prospectus (DRHP) to raise equity for real
estate company Sahara Prime City Ltd.
through an initial public offering (IPO).The
DRHP disclosed details of 2 associate group
companies (SIREC and SHIC) that were
raising huge amounts of money from the
public through OFCD.

8. Details of the case
 Sahara India has 2 companies SIRECL and SHICL
that issued OFCD through subscriptions from
investors
 Raised 24000 crore from investors
 The purpose of issue was to carry out
infrastructural activities namely, constructing
the bridges modernizing or setting up of
airports, rail system or any other projects which
may be allotted to company
 As per sahara issue of OFCDs was private
placement.

9.  However, amount collected from about 2 to 2.5
crore investors in the disguise of a private
placement.
 Later sahara prime city ltd intended to raise
funds through listing of its shares filed
prospectus

10.  SEBI received the complaint from CA Roshan
Lal from Indore on 4th Jan 2010 that,
sahara is an unlisted company and
collecting huge money from public issue by
means of OFCD and there existed a pending
dispute between the income tax department
and sahara for collecting public money by the
way of OFCD.

11.  The whole time member of SEBI Mr.
K.M.Abraham (IAS officer) passed an order
dated 23rd June, 2011 directing the 2 companies
to refund the money so collected to the
investors.
 Also restrained the promoters of the 2
companies SIRECL and SHICL including Mr.
Subrata Roy from accessing the securities
market till further orders.
 Sahara then preferred an appeal before
Securities AppellateTribunal(SAT) against the
order.
 SAT confirmed and maintained the order of SEBI
by an order dated 18th October, 2011.

12.  Subsequently sahara filed an appeal before
the supreme court of India against SAT order.
 Supreme court directed refund of Rs 24000
crore to an estimated 2 to 2.5 crore investors.
 But suddenly sahara said it had repaid about
90% of the money over the last one year.
 Supreme court ordered the sahara to give
detailed information about the investors to
SEBI for verification.

13.  Sahara group dispatched 3 truck loads to SEBIs
headquarters
 Supreme court appointed one of its retired
judges Justice B.N.Aggarwal to oversee SEBIs
action in this regard.

14. Sahara’s contention
 Issue of OFCD is legal.
 Issue of OFCD’s is not a public issue.
 OFCD are shares nor debentures but hybrid
class.
 OFCD’s are hybrid instruments which cannot
be listed.
 Serious error is committed by SEBI.
 No statutory requirement to list OFCD.

15. SEBI’s contention
 OFCD was public issue.
 OFCD’s were transferable securities
 Violation of sec 67 of companies act
 Did not submit balance sheet and P&L
account to the concerned ROC.

16. Supreme court contention
 Aggrieved sahara appealed to SAT
 Passed order in favor of SEBI
 Aggrieved sahara again moved towards
supreme court
 Finally , supreme court passed the judgment
in favor of SEBI
 Ordered sahara to repay the Rs 24000 crore
with 15% interest.

17.  Supreme court allowed sahara to pay whole
amount in 3 installments
 120 crore immediately, 10000 crore in January
2013 and remaining amount by February 2013
 But by February they failed to pay second and
third installments.
 SEBI after getting permission from supreme
court froze all bank and demat accounts and
attaches properties of chief Subrata Roy and
other 2 directors.

18.  On October 28, 2013, supreme court directed sahara
to submit title deeds of properties worth Rs 20000
crore to SEBI.
 later, supreme court banned Subrata Roy and 2
directors (Ravi Shankar Dhube and Ashok Roy
Choudry) from leaving the country.
 February 20, 2014, supreme court directed Subrata
Roy to appear before it on February 26
 But Subrata Roy did not appear, then on 26
supreme court issued non-bail-able arrest warrant
against Subrata Roy and other 2 directors.
 Subrata Roy surrendered before the Lucknow police
on February 28.

19.  Subrata Roy and other 2 directors Ravi
Shankar Dhube and Ashok Roy Choudry were
sent to thihar jail.
 On 2 march, 2014 they got bail by paying
10000 crore
 And by 2017 almost all the money were paid
to SEBI by sahara.

20. Conclusion
 Adverse effect on reputation go the country
 Adverse effect on economy
 Corruption and misuse of power
 Lack of transparency creating speculation
 Effective and strict judicial decision.

21. THANK YOU