Subrata Roy’s death: What happens to Sahara’s Rs 25,000 crore funds with SEBI?

Sahara Group founder Subrata Roy’s death has brought his controversial legacy to the fore. There is now the question of the future of the undistributed funds of over Rs 25,000 crore lying with the market watchdog, the Securities and Exchange Board of India (SEBI), for over a decade. Roy died of a cardiac arrest in Mumbai at the age of 75 last week after an “extended battle with complications arising from metastatic malignancy, hypertension and diabetes”, as per his company’s statement. Known for his rags-to-riches story, the fall of Roy , who was once among India’s richest businessmen, was entirely spectacular. We will take a brief look at it here. What is the story behind the unused Rs 25,000 crore? What happens to these Sahara funds in the SEBI account now? Let’s understand. Sahara Group’s legal troubles The legal woes of Subrata Roy’s company began in the early 2010s. It came under SEBI’s scanner after failing to repay money to investors. In 2011, India’s stock market regulator ordered two Sahara Group firms – Sahara India Real Estate Corporation Ltd (SIREL) and Sahara Housing Investment Corporation Ltd (SHICL) – to pay back the amount raised from about 3 crore investors through certain bonds, as per the news agency PTI report. This came after SEBI ruled that the Rs 24000 crore raised by these two firms through bonds was illegal. According to BBC, Sahara had started raising money from nearly 2.76 crore small investors in the mid-2000s, most of whom were from rural India – in Uttar Pradesh and Bihar. Around 97 per cent of these investors had deposited less than Rs 40,000, reported NDTV. In August 2012, the Supreme Court upheld the SEBI’s order, asking Sahara’s two firms to refund investors with 15 per cent interest. The apex court asked Roy ’s company to deposit approximately Rs 24,000 crore with the SEBI. However, the group maintains its liability was quite less and it had paid back over 95 per cent of investors directly, according to PTI. “The court had asked these companies to deposit the money with the SEBI, but since they did not have cash, they raised Rs 80,000 crore via four co-operative societies. Out of this, Rs 25000 crore was transferred to the SEBI and Sahara Group invested the remaining amount in Aamby Valley City,” a senior government official told NDTV. [caption id=“attachment_13412242” align=“alignnone” width=“640”] Sahara group chairman Subrata Roy (C) arrives at the Supreme Court in New Delhi on 4 March 2014. Reuters File Photo[/caption] Roy even went to jail for a little over two years after being arrested in 2014 as he failed to appear in court over the case. He was later granted bail in 2016. SEBI has issued Rs 138.07 crore in refunds to investors over a period of 11 years, PTI reported citing the regulator’s latest annual report. The amount deposited in the bank accounts opened specially for reimbursement is over Rs 25,000 crore. According to the regulator’s latest report, it received 19,650 applications for 53,687 accounts as of 31 March 2023, of which “refunds have been made concerning 17,526 applications involving 48,326 accounts for an aggregate amount of Rs 138.07 crore, including the interest amount of Rs 67.98 crore”, PTI reported. The rest of the applications were closed due to being untraceable. The regulator said it recovered a total sum of Rs 15,646.68 crore as of March this year. As per the news agency, “this amount along with the accrued interest after due refunds to the eligible bondholders was deposited in nationalised banks” in line with the apex court’s 2012 verdict. According to SEBI, around Rs 25,163 crore funds recovered from the Sahara Group have been deposited in these state-owned banks as of 31 March 2023. What happens to Sahara’s funds with SEBI now? As per a report in the Economic Times (ET), the Centre is exploring legal options to transfer the unclaimed funds of the Sahara-SEBI Refund Account to the Consolidated Fund of India. Officials say there are hardly any claimants coming forward after 11 years. However, government sources told NDTV that it would be “premature” for the SEBI to transfer the unclaimed funds. “We have managed to pay about Rs 230 crore to as many as 2.5 lakh investors. New registrations are still taking place, so it would be premature to say money from the SEBI would be transferred to the Consolidated Fund of India,” the senior government official told the news channel. [caption id=“attachment_13412282” align=“alignnone” width=“640”] SEBI’s account has over Rs 25,000 crore of undistributed funds recovered from Sahara Group. Reuters (Representational Image)[/caption] Union cooperation minister Amit Shah launched the ‘CRCS-Sahara Refund Portal’ in July to facilitate the repayment to lakhs of depositors in four cooperative societies of Sahara Group within 45 days of registration. As per NDTV, SEBI disbursed Rs 5,000 crore initially, with investors getting the amount via the Sahara refund portal. “It’s an automated, streamlined, and structured process and it is still ongoing. Once completed, then only the legality of transferring the funds to CFI can be examined,” the news channel quoted the government official as saying. There would also be a clause for transferring funds to investors in the future, NDTV reported. With inputs from agencies