Whiff of 'benami' investors in 2 Sahara firms grows stronger

On 31 August last year, the day the Sahara Group was directed by the Supreme Court to refund over Rs 24,000 crore of money invested in two group companies, the group threw an open challenge saying it had no benami money. All the money belonged to bonafide investors.

“For the past seven-eight years, we have faced the onslaught of various authorities since they concluded whimsically…that the deposits and investments we have received from the public are fictitious and bogus as they feel the money with us is ill-gotten from politicians, etc,” the group told The Times of India.

In another statement issued the same day, Sahara flung the gauntlet at its critics. “The fact is that there is not a single benami money (sic) and this statement is Sahara’s challenge to all authorities of our country. Each and every rupee we have accepted in (the) last 33 years is always against receipt from the company and with an application form duly signed by its depositors and investors.”

Market regulator Sebi, which has been tasked to check Sahara’s documentation and repay investors, is about to call Subrata Roy’s bluff.

An Indian Express report today says that in the lakhs of investor names indicated by Sahara in its documentation submitted to Sebi, only 68 - yes, just 68 - investors were found to be genuine. The rest are uncertain. Says the report: “Sebi found that in a batch of 20,000 mailers it sent to investors based on details given by Sahara, more than 8,000 were returned by India Post with the stamp “addressee untraceable.” Of the 500 queries it received from investors on its website, 400 gave fictitious addresses.

And yet, the Sahara Group continues to be in denial. “There cannot be (even) one fictitious investor…and our workers know each and every investor. It is high time, in the interest of investors, Sebi should also give us chance and importance.”

One wonders which world Sahara inhabits. Having done everything to pull wool over every regulator’s eyes, and having successfully avoided repaying the Rs 24,000 crore even to this day, the group is clearly cocking a snook at the law, including the Supreme Court.

Sebi, which was pulled up by the Supreme Court for not implementing its 31 August 2012 orders, has since frozen the accounts of two Sahara companies - Sahara India Real Estate Corporation (SIREC), and Sahara Housing Investment Corporation (SHIC) - which had duplicitously raised money through optionally fully convertible debentures (OFCDs) after avoiding Sebi scrutiny.

Suspicions about the Sahara Group’s benami funding have always been doing the rounds in the media. But these got more credence when Sebi’s former Wholetime Director, KM Abraham, issued a damning order dated 23 June 2011 in which he first flagged the fact that many of the investors in SIREC and SHIC debentures were untraceable. The Supreme Court found so many incongruities in a single effort at verification, that the smell of benami only got stronger.

According to Abraham, SIREC did not even have access to its own OFCD investors and needed professional accounting firms for help. He said: “If the identity of the investors and addresses themselves are not readily available with the firm - and the compilation and authentication of the data across the thousands of service centres will have to, as admitted by SIREC, require the support of professional accounting firms at this stage, then I wonder what real safeguards can possibly be there in place for investor protection?”

Abraham’s order made references to his own random check on four names on Sahara’s OFCD subscriber list. He found two of them non-existent. But the Supreme Court, after doing its own cursory fact-checking, found Sahara’s record-keeping was a sham.

Justice JS Khehar, one of the members of the two-judge bench that delivered the 31 August Sahara verdict, also confirmed that the same fact.

After checking just one detail of one of Sahara’s alleged OFCD investors, Justice Khehar picked so many holes - about the name (Kalawati), address and other details - that he was forced to conclude negatively. “There is no other option but to record that the impression emerging from the analysis of the single entry extracted above is that the same seems totally unrealistic, and may well be, fictitious, concocted and made up”.

Sebi’s recent discovery of only 68 bona fide names in Sahara’s list of investors also points to the dubious nature of the group’s activities.

The whiff of benami transactions will not go away unless the group is investigated separately by a Special Investigation Team , and possibly monitored by the Supreme Court itself.

That politicians have made no noises about Sahara tells its own story. The question: do the courts have the willingness to unravel the mysteries of Subrata Roy’s finances?