Sahara stalemate: Has Supreme Court boxed itself in over jailed Subrata Roy?

This is surely a piquant situation: Subrata Roy, the man who cocked a snook at the Supreme Court for 18 months over the matter of refunding Rs 24,029 crore to investors in two Sahara Group companies, has been in the court’s custody for over a month now.

Roy refuses to pay Rs 10,000 crore - half in cash, the rest as a bank guarantee - in order to convince the court he is at least now keen to comply with its order of 31 August 2012, and his lawyers claim his arrest is extraordinary. The court has ordered two Sahara companies - Sahara India Real Estate Corporation and Sahara Housing Investment Corporation - to refund the money raised through illegally issued optionally fully convertible debentures (OFCDs) to investors through Sebi, which would then ascertain the bonafides of the investors before repaying them directly.

Roy claims the investors were mostly repaid, the court says its orders have not been complied with - and hence the decision to keep him in jail.

The court says the amount sought to release him is not the bail amount, nor has it convicted him of anything. Nor is it holding him as punishment for contempt of court. At yesterday’s (9 April’s) hearing, the bench comprising Justices KS Radhakrishnan and JS Khehar said simply that “he is in our custody” and it would consider Roy’s lawyer, Ram Jethmalani’s plea, that he can be kept under house arrest so that he can talk to some international parties who will help him.

Jethmalani claimed that some international parties were willing to bail Roy out, but “who will meet him in jail?”

However, the Supreme Court on Wednesday turned down the Sahara group’s request to release Subrata Roy from jail and keep him in house arrest or office arrest to facilitate collection of money.

But the court seems unwilling or unsure of how it should proceed. Given that Roy claims all his investors have been repaid, and the court says he still has to pay Rs 24,029 crore to Sebi plus interest, and given also that no investor has actually come forward claiming he has been gypped, the only statement that squares with these facts is that there is a strong whiff of benami money.

The court probably knows this - and had even hinted about this in its judgment of 2012 - but is balking at how it can sink its teeth deeper into the Sahara mess without overextending its mandate. Has the court boxed itself in by arresting Roy and then holding back from taking the next logical step on ferreting out money laundering?

Jethmalani’s claim that some international parties were willing to help bail out Sahara, in fact, offers a further hint that there are wheels within wheels in Roy’s investor deals.

After all, why would any credible international party want to give money to Roy if it did not already have links with his business? Isn’t it likely that these parties are linked to the money that Sahara has not paid up so far? Why would an international party want to cough up Rs 10,000 crore to a jailbird who has been sent to Tihar on the explicit orders of the highest court in the land.

Jethmalani’s claim that Roy’s credibility has been affected by being sent to Tihar may be true, but his plea for house arrest - so that he can negotiate with parties willing to help him - suggests that his future helpers do not want to be identified. Otherwise, deals can be done even in jail.

If the key issue now is benami money rather than unpaid investors, the only sensible course for the Supreme Court to adopt in this situation is to appoint an administrator for the Sahara group and order a multi-agency probe on money laundering - as I have suggested repeatedly. One wonders why the court is hesitating to take this call. This is the only way to unmask the Sahara Group’s real investors.

Sebi has shown that is not upto the task of doing the hard work to unmask them. Or else it would have gone somewhere by now.