Sebi fails to find investors, Sahara case gets complicated

NEW DELHI: With Sebi failing to find the investors of two Sahara funds — Sahara India Real Estate Corp (SIRECL) and Sahara Housing Investment Corp (SHICL) — the strange case against Sahara chief Subrata Roy and two Sahara directors has turned stranger. Sebi’s case rests on its claim that Sahara has not refunded Rs 20,000 crore of investor money. And yet, despite advertisements in papers and other strenuous efforts, the market regulator has not been able to find investors of more than Rs 10 crore.
This can mean only one of two things — either bulk of the Sahara investors are fictitious entities or the claim of Sahara that it has already repaid 90% of investors of these two funds is true. If the Sahara investors are fictitious, Sebi doesn’t really have a role as it is mandated to deal with real investors, and some other agency should look into the case. And if Sahara’s claim of having repaid its investors is true, Subrata Roy and the two directors shouldn’t be in jail.
From the very start, Sahara has maintained that most of its investors are relatively poor people from the rural hinterland — people who have been excluded by the banking system so far, and who can be detected only with the help of Sahara agents. Consequently, it has offered Sebi the help of its network of agents to reach Sahara investors. It says that only by reaching these investors, it can be determined whether these investors have been paid back their money.
Sebi has so far not been impressed by Sahara’s offer and tried to find the alleged investors on its own. Nor has the court felt that the modus offered by Sahara was necessary to determine whether these investors are real or not, and if real, whether they have been paid back their money. Now that Sebi’s advertisements have failed, the court might have no option but to try out what Sahara has been suggesting.
Otherwise, the logjam over Roy’s imprisonment — now for seven months — is unlikely to clear. While like all businessmen, he’s averse to any distress sale of his assets to raise Rs 10,000 crore — the bail pre-condition imposed by the Supreme Court — the case against him would appear to be rather doubtful if there’s no investor to whom this large amount is to be returned.
Some in the legal fraternity have questioned the legality of Roy’s continued detention. Now politicians like Manohar Parrikar are also expressing their disquiet. A resolution to the impasse is desirable not just because Roy is in jail, but also because Sahara is the employer of around a lakh people. His continued imprisonment could cripple the company and jeopardize these jobs.