Sahara hide and seek: Fit case for the income tax dept to step in

The two Sahara parivar companies, Sahara India Real Estate Corp (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL), which between them claim to have mobilised a staggering Rs 25,780 crore from public, are in the dock, and their promoter Subrata Roy has been cooling his heels for well over a year now in Delhi’s Tihar jail, unable to mobilise the bail amount ordered by the Apex Court.

The staggering amount initially were deposits but later on morphed into optionally convertible bonds, with the idea apparently being they would be conveniently converted into equity that is neither refundable or redeemable. This was a clever attempt at internal layering, as it were, of illicit money.

Normally, layering is done taking the help of myriad players in the game of money laundering but these two companies thought they would brazen it out. But the market regulator was quick to spot the irregularity - the conversion of deposits into optionally convertible bonds called for a public issue preceded by issue of prospectus.

Caught on the wrong foot, the two companies agreed to refund the proceeds of bonds to their respective holders. They claimed post-haste they had already refunded Rs 23,000 crore but the SEBI was not satisfied.

Desperate, the two companies contradicted their claim of repayment of Rs 23,000 crore by depositing Rs 12,000 crore with the Sebi which said it would take upon itself the responsibility of refund after identifying the bondholders by operating the KYC searchlight.

Predictably only a small number of bondholders have come forward despite two attempts made by the SEBI. The ongoing third attempt too would draw a blank given the fact that the bondholders are ghosts or benamis.

Both the Supreme Court and the SEBI are giving Roy a long rope, knowing impishly that he would be neither successful in mobilising bail amount of Rs 5,000 crore in cash and an identical amount through bank guarantees nor in producing the so-called bondholders.

The Supreme Court is hoping for another mea culpa, the earlier one being from Ramalinga Raju of Satyam infamy. But Roy is not likely to spill the beans and reveal the names of the real owners of the money because while his revelation might be sensational, it would compound his agony what with the real owners preferring to disown their money rather than bringing disrepute on themselves.

And for good measure, they may even have the gall to slap a defamation suit on the beleaguered launderer. The Supreme Court in order to end the agony and charade must ask the income tax department to takeover. Section 269SS of the income tax law frowns on acceptance of deposits in excess of Rs 20,000 otherwise than through banking channels and section 269T similarly frowns on repayment of deposits otherwise than through banking channels.

Like political parties, Sahara companies must have taken care to split all cash deposits into less than Rs 20,000 each but mercifully for the law-enforcing agencies there is no exemption for companies to furnish the details of the depositors, the exemption political parties are latching onto with alacrity.

The point is the matter comes within the remit of the income tax sleuths in the absence of any law on benami in the country. The two companies owe the income tax department the explanation as who all deposited cash even if each such deposit was for less than Rs 20,000.

In the early nineties of the last century, the income tax department successfully prosecuted promoters of one Sophia Investments Ltd who had the temerity to convert their black money into white by subscribing to the equity of the company by getting made as many as 35,000 demand drafts towards the shares they had supposedly subscribed to from the same branch of a remotely located branch, with the branch manager playing footsie.

The author has for long been pleading for liquidation of the dubious Sahara companies after the due process of winding up but if the Apex Court is for some reason reluctant, the least it can do is to ask the income-tax sleuths, who are better qualified to step up the pressure on the Sahara group, to step in.