Sahara vs Sebi

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SAHARA SCAM
AMIT POONIA (160MBAGEN029)
POOJA DESWAL ( 160MBAGEN069)
YOGESH SINGLA ( 160MBAGEN027)

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INDEX
 ABOUT THE COMPANY
 LEGAL CASES ON SAHARA
 SAHARA COMPANIES INVOLVED IN THE SCAM
 BRIEF ABOUT THE CASE
 METHODS OF RAISING MONEY FROM THE MARKET
 WHAT SAHARA DID WRONG
 WHAT SAHARA , SEBI and COURT SAID
 CONCLUSION

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ABOUT THE COMPANY
 Sahara India Pariwar is an Indian conglomerate headquartered in Lucknow.
 Founded in 1978 it is a 40 years old company.
 The company has an estimated market capitalization of US$25.94 billion as of
March 2011.
 Chairman ( Subrata Roy )
 Business interests in finance, infrastructure & housing, media &
entertainment, consumer merchandise retail venture, manufacturing and
information technology

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SAHARA SCAM ( LEGAL CASES)
Legal Cases on
Sahara
• Money Laundering
• Fictitious Investors
• Dummy Shares

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SAHARA COMPANIES INVOLVED
IN THE CASE
SAHARA PRIME CITY LTD.
• SIRECL
• SHICL

6. +SAHARA SCAM (BRIEF ABOUT THE CASE )
 The case all began when a Chartered Accountant in Indore sent a note to the
National Housing Bank, requesting the Bank to look into the housing bonds issued
by two Sahara Group Companies, Sahara India Real Estate Corp (SIREC) and
Sahara Housing Investment Corp (SHIC), having there head quarters in Lucknow.
He found that the bonds that had been issued to a large number of investors had not
been issued as per the rules.
 The National Housing Bank did not have the wherewithal to investigate the
allegation, So it forwarded the letter to the Securities and Exchange Board of India
(SEBI) , the capital markets regulator.
 Mr. Abraham who was the then Director of SEBI was reviewing the Draft Red
Herring Prospectus (DRHP) to raise equity for real estate company Sahara Prime
City Ltd through an initial public offering (IPO). The DRHP disclosed details of
two associate group companies (SIREC and SHIC) that were raising huge amounts
of money from the public through optionally fully convertible debentures.

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SAHARA SCAM IMPORTANT DATES
 November 2010 - Securities and Exchange Board of India (SEBI) bars Sahara India Pariwar Chief,
Subrata Roy and two of its companies – Sahara India Real Estate Corp (SIREC) and Sahara Housing
Investment Corp (SHIC) from raising money from the public as they raised several thousand crores
through OFCD which SEBI deemed illegal.
 December 2010 - Sahara appeals to Allahabad High Court which ordered SEBI not to take any
action until a court order is passed
 January 2011 - Delhi High court issued a warrant against Subrata Roy and four other officials of the
Sahara India on a complaint that it deceived investors in a proposed housing project of Rs.24,000
crore.
 February 2011 - Delhi High court stays proceedings against Subrata Roy and four other officials of
the group on a complaint that it deceived investors in a proposed housing project.
 May 2011 - Supreme Court of India asked Sahara India Real Estate (SIREC) to furnish the format of
the application for an optionally fully convertible debentures (OFCD) scheme and a list of accredited
agents which raised money on company's behalf.
 June 2011 - SEBI ordered Sahara firms to immediately refund the money collected through sales of
OFCDs.

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SAHARA SCAM IMPORTANT DATES
 October 2011 - Securities Appellate Tribunal (SAT) ordered two unlisted Sahara Group companies to
refund within six weeks about 18,000 crore with 15% interest which it had raised through a flotation of
OFCDs.
 November 2011 - Sahara India Pariwar moved to Supreme Court against SAT's order and in favor of
Sahara Group it stayed the SAT order, and asked the two companies to refund 17,400 crores to their
investors and asked the details & liabilities of the companies.
 January 2012 - Supreme Court gives three weeks time to Sahara India Pariwar to choose between
options to secure investments made by public in OFCD scheme. Either to give sufficient bank guarantee
or attach properties worth the amount raised through OFCD's.
 May 2012 - Supreme court is informed by Senior counsel Fali Nariman (appearing for Sahara India
Real Estate Corp) that SEBI could not have taken up this issue of Sahara Group of companies raising
funds through OFCD since there was no complaint from any investor.
 June 2012 - SEBI informed Supreme Court that real estate division of Sahara India Pariwar had no right
to mobilize Rs.27,000 crore from investors through optionally fully convertible debentures (OFCD)
without complying norms of Market regulator - SEBI.

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SAHARA SCAM IMPORTANT DATES
 August 2012 - Supreme court directs Sahara India Real Estate Corporation Ltd.
(SIRECL) and the Sahara Housing Investment Corporation Ltd. (SHICL) to refund over
Rs. 24,400 crore.
 March 2015 – Supreme Court had directed two Sahara group companies — SIRECL
and SHICL — to return around Rs 24,000 crore with interest to nearly 3 crore investors
through market regulator SEBI in Aug 2012. The firms were later allowed to pay up by
February 2013. So, the total dues have now gone up to Rs 40,000 crore with the
accretion of interest.
 July2015 - SEBI directed cancellation of Sahara Mutual Fund's certificate of
registration on expiry of a six-month period.

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SAHARA SCAM
METHODS OF RAISING MONEY FROM THE MARKET

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PRIMARY MARKET

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SECONDARY MARKET
 In secondary market, the securities issued in the primary market are bought and
sold. Here, you can buy a share directly from a seller and the stock exchange or
broker acts as an intermediary between two parties.
 The secondary market is actually formed by another layer of investors who deal
with primary market investor to buy and sell financial securities such as bonds,
futures and stocks. These dealings happen in the proverbial stock exchange.
 National Stock Exchange (NSE) and New York Stock Exchange (NYSE) are some
popular stock exchanges. Majorly, the trade happens between investors without any
involvement with the company that issued the securities in the primary market.

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WHAT SAHARA DID WRONG?
 In DRHP said their company as the private company but operated as the public
company.
 Took money through OFCD from more than 50 people and violating what
they have written in the DRHP.
 Never reported to the SEBI.
 Made fake investors and took money on the names of these investors.
 Used the illegal methods such as money laundering.
NOTE – DRHP is the set of documents containing the information about the
company from financial info to operational info.

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WHAT SAHARA SAID
 Issue of Optimally Fully Convertible Debentures (OFCD’s) is legal.
 Issue of OFCD’s is not a public issue.
 OFCD are neither shared nor Debentures but “Hybrid” Class
 OFCD’s are “Hybrid Instruments” cannot be listed.
 Serious error is committed by SEBI.
 No statutory requirement to list OFCD’s.
NOTE – OFCD initially a debenture but can be converted into the shares
and form Equity not debt

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WHAT SEBI SAID
 OFCD was a public issue
 OFCDs were transferable securities
 Violation of section 73 of Companies Act 1956
 Untrue Red Herring Prospectus
 Not following The Securities Contracts (Regulation) Act, 1956
 The forms issued by two companies did not enclose an abridged prospectus
 Did not submit Balance Sheet and P&L a/c to the concerned ROC

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SUMMARY
 Sahara aggrieved against the notice of SEBI moved to Allahabad High Court
and obtained a stay.
 SEBI filed the petition to Supreme Court.
 Recall of the earlier order
 Allahabad High Court rejected the recall order.
 SEBI again approached the Supreme Court
 Issue of fresh notice to Sahara by SEBI.
 Confirmation of violation of rules and regulations and therefore, order against
Sahara was passed

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LATEST IN THE CASE
 SEBI has began process of refund to investors being verified by it
 Refund is being made from Rs. 5,120 crore deposited by Sahara
 Non genuine investor details are provided by Sahara, many of which are fake
 Refund of estimated amount of Rs. 24,000 crore
 SEBI is demanding personal asset details, bank a/c of Subrata Roy
 SEBI has demanded arrest of Subrata Roy

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CONCLUSION
 The landmark judgment by Supreme Court is a milestone in India’s corporate
Landscape
 SEBI has absolute power to investigate into the matters of both listed
companies and unlisted companies
 It vests SEBI to investigate into any matter concerning the interest of the
investors even if it pertains to companies which are not listed
 Removes grey areas relating to issue by so called unlisted companies
 Forbids such unlisted companies to take advantages of legislative loopholes
 Jurisdictional gap is removed between MCA and SEBI in matters of public
interest

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BIBLIOGRAPHY
 www.mondaq.com
 www.business-standard.com
 www.slideshare.net

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