Allowing Subrata Roy to sell Sahara assets for his personal bail may not be right

Subrata Roy, the promoter in chief of the Sahara Parivar, would be back in the five-star state-of-the-art conference facility in Delhi’s Tihar jail to try and clinch the sale deals with his Indian and foreign interlocutors.

For the uninitiated, Roy has to mobilise about Rs 10,000 crore to get bail from the court. He has been locked up in the jail for the last more than nine months for disobeying the court order to hand over about Rs 24,000 crore to regulator Sebi. The amount was to be repaid to investors of optionally fully convertible debentures issued by two Sahara group companies. The repayment order was first passed by Sebi as it found the debenture issues were illegal.

The apex court has put a stiff condition for his bail – Rs 5,000 crore in cash and another Rs 5,000 crore in bank guarantees. Roy has been moving heaven and earth to mobilise this amount but has not been successful yet.

The court has been giving him a long rope, perhaps in the hope that he would use it to hang himself, so to speak, by singing like a canary about his shady deals especially on the money laundering front. Until 30 September 2014, he used the same communication facility in Tihar jail for 57 days.

He seems to have re-requisitioned the same facility this time round to bargain again with the potential buyers of the group’s foreign properties some of which belong to marquee variety. The court has indulged him just a wee bit again.

The Supreme Court is working to a carefully crafted game plan – to make Roy blink first in the war of attrition, unable to mobilise the requisite funds that would ensure his release on bail and unable to suffer the monotony and pain of the jail life.

But the issue is should he be allowed to liquidate his group’s properties for such a blatantly personal purpose as securing his own bail?

In Solomon & Solomon case of the yore, the House of Lords held that Solomon the individual was not the owner of the company he had promoted and hence he couldn’t be held liable for the liability to creditors beyond what he had committed to pay by way of subscription to the share capital of the company.

Solomon, who thus got a reprieve, must be chuckling in his grave at what the Indian Supreme Court is doing – allowing him the liberty of using company assets for securing his own liberty!

To be sure, the corporate veil has been lifted in the past both in India and abroad but on each of these occasions it was for the purpose of protecting public interest or revenue of the government.

It is perhaps for the first time that the corporate veil is being implicitly lifted for the benefit of the promoter.

If Roy indeed succeeds in mobilising the requisite amount, that would be at the expense of other shareholders and stakeholders of the group companies some of which like Sahara Housingfina Corporation Ltd are listed.

It is entirely possible that the realizations on sale of prime properties may be for less than optimal amounts given the fact that all of them would be distress sales and the buyers would take full advantage of it.

There is another worry. What if the wily Roy helps himself to a tidy fortune by asking his interlocutors to deposit an undisclosed amount surreptitiously in Swiss or other clandestine bank accounts despite the overweening and overbearing presence of security personnel?

After all, his trusted lieutenants outside can take care of the surreptitious part of the deal.

Sahara Parivar’s website proclaims proudly that the group believes in the philosophy of collective materialism (whatever that means) and forswears dividend. That dividend is forsaken perhaps proves what the people in the know have all along been suspecting – it is not a normal investment venture but a money laundering one where dividend does not matter but safety and legalizing of money does.

Hence it might be a one man show like Solomon & Solomon with very few genuine investors. The court knows this and wants him to stew in his own juice. Nevertheless, in the humble view of the author, it would do well to stop this game of who blinks first and appoint a receiver who in any case would expose the shenanigans of Roy.

Let him enjoy freedom until his goose is cooked. For, if Roy indeed succeeds in selling his group company properties, it would introduce a new twist to the tale – addressing the concerns of other stakeholders including banks.

It might also rattle the banking system should Roy use his considerable clout to get bank guarantees aggregating to say Rs 5,000 crore or the shortfall between Rs 10,000 crore demanded by the Apex Court and the sale proceeds.

Release him after impounding his passport and simultaneously appoint a receiver whose brief must be expeditious liquidation of the arguably most controversial business conglomerate in the history of India.