Subrata Roy Sahara: The Financial Godman Supported by the Indian Cricket Team

Krishnaraj Rao

India’s watchdogs SEBI, RBI, IRDA and Ministry of Corporate Affairs more-or-less proclaimed Subrata Roy Sahara an economic offender last year, but our cricketers continue to wear the tri-coloured Sahara India brand on their chest. Scary, isn’t it? Players worldwide have their country’s name emblazoned on their uniform, but our boys in blue bear the name of a conglomerate of barely-legal companies, partnership firms and HUFs – one which has milked about 5 crore financially illiterate investors of Rs 73,000 crore. Between April 2008 and 2011 alone, Sahara India collected about Rs 30,000 crore by a dubious process – single-handedly mopping up more than all of India’s corporate sector! The only reason that Subrata Roy Sahara and his henchmen are not yet in CBI custody is that nobody has actually registered a criminal complaint against them, despite abundant prima facie evidence!

On 8 April 2012, Maharashtra’s Chief Minister Prithviraj Chavan and India’s Agriculture Minister Sharad Pawar inaugurated Maharashtra Cricket Association’s international cricket stadium in Pune, named Subrata Roy Sahara stadium. At the grand opening ceremony, Priyanka Chopra, Preity Zinta and other actresses performed live dances, and Amitabh Bachchan added his highly respected voice. Reassured by the sheer visibility of the Sahara India brand, thousands of people in UP and Bihar may even today handing over their money to the company’s touts who give them verbal assurances and pieces of paper with no legal backing. Examples of Sahara India’s schemes: http://tinyurl.com/Sahara-SIRECL-SHICL-bonds

“Saharasri” Subrata Roy Sahara, the self proclaimed guardian of the “world’s biggest family”, preaches a new-age religion called Collective Materialism. Sahara India’s powerpoint presentation (http://tinyurl.com/Subroto-Roy-Sahara-India ) is a proclamation of this superstitious philosophy that throws accounting norms and corporate governance to the winds. It boasts, “In the last 33 years, not even a single dividend has been declared by the group and not even a single rupee has been shared from the profit by anybody.” The same slide claims that 40% (of what? Gross profit? Profit after tax? And of which year exactly?) goes towards “Welfare of Kartavya Yogis” (presumably meaning employees salaries and agents’ commissions) and 25% towards “Social Development Activities”.

“Social Development Activities” presumably includes Sahara India’s Rs 100-crore-per-year sponsorship of the Indian cricket team — or should we say, BCCI’s private cricket team? Because the government and people of India have no control over BCCI (Board of Control for Cricket in India), which is essentially a private body. BCCI uses government-owned stadiums across the country at a nominal annual rent, but it is a “private club consortium” that is not answerable under Right to Information. Bound by BCCI’s secret contracts with Sahara India, our cricketing heroes are willy-nilly forced to be this godman’s hoardings.

It is worth noting that the name ‘Sahara India Pariwar’ is engineered to sound like a government scheme for providing shelter for India – a bit like, say, Indira Awas Yojana. Sahara India Pariwar is projected as a supersized Hindu Undivided Family (HUF), which is non-commercial in nature, plays cricket and wins glory and money together in a fantasy world where “all Indians are my brothers and sisters, including Sachin Tendulkar”.

At a time when armed insurgency and terrorism threatens this country from all directions, it is especially urgent to penetrate the patriotic smoke-screen and track down the massive cash-flows. Because very little of these cash-flows seem to be going into any genuine manufacturing and services sector. One rarely meets anybody who uses a single product or service produced by this massive super-brand — with the exception of people who watch Sahara Samay News, or flew Sahara Airlines many years back.


Between April 25, 2008 and April 13, 2011, Sahara India Real Estate Corporation Ltd (SIRECL) collected Rs. 19400,86,64,200 (nineteen thousand four hundred crores, eighty six lacs, sixty four thousand and two hundred) by floating various kinds of bonds or debentures in an open-ended scheme without proper approvals, institutional safeguards for investors or market listing. As on August 31, 2011, the company had a total collection of Rs. 17656,53,22,500 (seventeen thousand six hundred and fifty six crores, fifty three lacs, twenty two thousand and five hundred) after meeting the demand for premature redemption. This amount was collected from 2,21,07,271 (two crores twenty one lacs seven thousand two hundred and seventy one) investors.

And what is the financial strength of this company that mopped up over Rs 17,656 crore? It’s issued, subscribed and PAID-UP CAPITAL IS RS 10 LAKHS i.e. one lakh equity shares of Rs 10 each. It is an UNLISTED COMPANY i.e. its shares are not listed on any stock exchange. Sahara India Real Estate Corporation Ltd (1, Kapoorthala Complex, Aliganj, Lucknow) was originally incorporated as Sahara India “C” Junxion Corporation Limited on October 28, 2005 as a public limited company under the Companies Act and it changed its name to the present one on March 7, 2008. As per the Balance Sheet of the company as on December 31, 2007, its cash and BANK BALANCES WERE RS. 6,71,882 AND ITS NET CURRENT ASSETS WERE WORTH RS. 6,54,660 ONLY. IT HAD NO FIXED ASSETS NOR ANY INVESTMENTS AS ON THAT DATE. IT’S OPERATIONAL AND OTHER EXPENSES FOR THE THREE QUARTERS ENDING DECEMBER 31, 2007 WERE RS. 9,292 AND THE LOSS CARRIED FORWARD TO BALANCE SHEET AS ON THAT DATE WAS RS. 3,28,345.

This company has three directors, namely, Vandana Bharrgava, Ravi Shankar Dubey and Ashok Roy Choudhary, all appointed in January-February 2008. THESE DIRECTORS DO NOT DRAW ANY REMUNERATION FROM THE COMPANY NOR DO THEY HOLD ANY SHARE CAPITAL. The three directors who were on the board of directors at the time of incorporation resigned from directorship when the present directors were appointed. Subrata Roy Sahara, the chief promoter of the company and beneficiary of the scam, stayed at arms length from the entire venture.

Needless to say, SIRECL was nowhere near fulfilling the eligibility norms of a company making a public issue. To become eligible for making a public issue, an unlisted issuer should have net tangible assets of at least Rs. 3 crore in each of the preceding three full years, distributable profits in at least three of the immediately preceding five years, net worth of at least Rs. 1 crore in each of the preceding three full years. Further, issue size should not exceed 5 times the pre-issue net worth as per the audited balance sheet of the last financial year etc. If the issuer is unable to comply with any of these conditions, it can make a public issue, provided if at least 50% of the issue is allotted to the Qualified Institutional Buyers or if project is appraised and participated to the extent of 15% by Financial Institutions or Scheduled Commercial Banks. Additionally, the promoters should contribute not less than 20% of the post issue capital, which should be locked in for a period of 3 years.


If you google for “Watch Out Investors”, you find a website sponsored by Ministry of Corporate Affairs’ Investor Education and Protection Fund. This website is a treasure of data about companies and individuals indicted by Securities and Exchange Board of India (SEBI) and other regulators. SUBRATA ROY SAHARA AND 16 SAHARA INDIA COMPANIES ARE AMONG THE INDICTED ENTITIES on this page:http://www.watchoutinvestors.com/compindex.asp?findword=S

The data is contained in 4-5 documents:

1.RESERVE BANK ORDER DATED 17 JUNE 2008 against Sahara India Financial Corporation Ltd (SIFCL):http://tinyurl.com/RBI-June-2008-Order-SIFCL

Highlights: As early as 2008, Reserve Bank of India had noted wrongdoings in Sahara India entities. On 17 June 2008, RBI ordered SIFCL not to accept any new deposits that mature beyond 30 June 2011. It directed SIFCL to reduce its liability in a phased way, so that its liability did not exceed Rs 15,000 cr on 30 June 2009, Rs 12,600 cr on 30 June 2010 and Rs 9,000 cr on 30 June 2011. Also, SIFCL was directed not to treat any non-payment of installments as a default, and to continue to pay the agreed rate of interest on the actual amount held by it as if there was no default. SIFCL moved Lucknow High Court and later, Supreme Court, for a stay on RBI’s order, RBI’s order aimed at protecting the interest of investors was upheld.

2.SEBI ORDER DATED DATED 24 NOVEMBER 2010 against Sahara Prime City Limited: http://tinyurl.com/SEBI-Nov-2010-Sahara-PrimeCity

Highlights: SEBI received various complaints in respect of the disclosures made in the Draft Red Herring Prospectus (DRHP) of Sahara Prime City Limited. It was alleged that a housing companies in Sahara Group, Sahara India Real Estate Corporation Limited (SIRECL) was issuing convertible bonds to the public throughout the country for many months and this was not disclosed in the aforesaid DRHP. It was noticed that the Optionally Fully Convertible Debentures (OFCDs) or bonds had varying face values from Rs 5,000 to Rs 24,000, and maturity periods varying from 48 to 180 Months, redemption values and conversion options. Despite repeated notices from SEBI, Sahara India steadfastly avoided disclosing essential information such as copies of the application forms, Red-Herring Prospectus, pamphlets, advertisements and other promotional materials circulated for issuance of OFCDs, details regarding number of application forms circulated inviting subscription for OFCDs, number of applications and subscription amount received for OFCDs, date of opening and closing of the subscription list for the OFCDs, number and list of allotees for the OFCDs and the number of OFCDs allotted and value of such allotment against each allotees name, date of allotment of OFCDs, copies of the minutes of Board/committee meeting in which the resolution has been passed for allotment, copies of the Annual Reports filed with Registrar of Companies for the immediately preceding two financial years, and date of dispatch of debenture certificate etc. In the words of Dr K M Abraham, Whole Time Member of SEBI who signed the order, “it is rather perplexing that the companies having mobilized money through the OFCDs, could not provide even the basic details pertaining to its issue or investors. It is the contention that the OFCDs were issued by way of private placement to friends, associates, group companies, workers/employees and other individuals who are associated/ affiliated or connected in any manner with Sahara India Group of Companies.” The SEBI order restrained SIRECL and SHICL from mobilizing funds under the Red Herring Prospectus dated March 13, 2008 and October 6, 2009, respectively, filed with the concerned Registrar of Companies, and directed them not to offer their equity shares/OFCDs or any other securities to the public and invite subscription, in any manner whatsoever, either directly or indirectly till further directions. The same prohibitions also apply to the promoters and directors of these companies, namely, Subrata Roy Sahara, Vandana Bharrgava, Ravi Shankar Dubey and Ashok Roy Choudhary.

3.(a)  SEBI ORDER DATED 23 JUNE 2011 against Sahara India Real Estate Corporation Ltd or SIRECL (now called Sahara Commodity Services Corporation) and Sahara Housing Investment Corporation Ltd (SHICL): http://tinyurl.com/SEBI-June-2011-SIRECL-SHICL

Highlights: SIRECL issued three types of bonds, viz Abode Bond, Real Estate Bond and Nirmaan with different values, different terms and redemption periods, and with the option of conversion into equity shares of Rs 10 at varying premium on completion of a certain term period. The bond holder can also transfer the bonds to any other person, subject to the terms and conditions and approval of the company. SHICL also issued three types of bonds, namely Multiple Bond, Income Bond and Housing Bond with various options for pre-mature redemption. SHICL opened the issue in 2008 and had not closed the issue till the date of the order. SIRECL opened the issue in 2009 and it too had admittedly not closed the issue. Sahara India Commercial Corporation Limited, a company related to SHICL and SIRECL too had kept an issue for an overall size of Rs 17250 cr. open for ten years. “Can an issuer file an Information Memorandum, open the issue and keep the same open for indefinitely? In fact, does it mean that an issuer need not even close the issue and can keep it open perpetually?” asked Dr K M Abraham, SEBI’s Whole Time Member. The Directions were: (i) The two Companies, Sahara Commodity Services Corporation Limited (earlier known as SIRECL) and SHICL and its promoter, Subrata Roy Sahara, and the directors of the said companies, namely, Vandana Bhargava, Ravi Shankar Dubey and Ashok Roy Choudhary, jointly and severally, shall forthwith refund the money collected by the aforesaid companies through the Red Herring Prospectus dated March 13, 2008 and October 6, 2009, to the subscribers of OFCDs with interest of 15% per annum from the date of receipt till the date of repayment. (ii) Such repayment shall be only in cash through Demand Draft or Pay Order. (iii) Sahara Commodity Services Corporation Ltd and SHICL shall issue public notice, in all editions of two National Dailies — one English and one Hindi — with wide circulation, detailing the modalities for refund, including details on contact persons including names, addresses and contact details, within fifteen days of this Order coming into effect. (iv) Sahara Commodity Services Corporation Ltd and SHICL are restrained from accessing the securities market for raising funds. (v)SUBRATA ROY SAHARA, VANDANA BHARGAVA, RAVI SHANKAR DUBEY AND ASHOK ROY CHOUDHARY ARE RESTRAINED FROM ASSOCIATING THEMSELVES, WITH ANY LISTED PUBLIC COMPANY AND ANY PUBLIC COMPANY WHICH INTENDS TO RAISE MONEY FROM THE PUBLIC, till such time the above payments are made to the satisfaction of SEBI.

(b)   These directions are summarized in SEBI’S PRESS RELEASE dated 23 June 2011: http://tinyurl.com/SEBI-June-2011-Press-Release

4.SECURITIES APPELLATE TRIBUNAL (SAT) ORDER DATED 18 OCTOBER 2011 is lucidly reasoned, and clearly sets out the merits of the earlier SEBI orders, as well as the laudable initiative taken by SEBI’s Whole-Time Member Dr K M Abraham to cross-check the address-lists of investors provided, as well as debunk the dubious arguments of Sahara Group: http://tinyurl.com/SAT-Oct-2011-SIRECL-SHICL

5.IRDA ORDER DATED 27 FEBRUARY 2012 against Sahara Life Insurance Co Ltd indicates much that is wrong with all Sahara Group companies, such as freely using the stationery, officials and money of group companies and throwing fiscal discipline to the winds: http://tinyurl.com/IRDA-Feb-2012-Sahara-Insurance


INDIA TODAY’S OCTOBER 2011 ARTICLE TITLED ‘THE RS 73,000 CRORE MAN’ appears to be based on many of these documents. This article paints Subrata Roy Sahara as a troubled entrepreneur rather than a white-collar criminal, a money-launderer, and a man who is actively undermining the integrity of the financial markets and the political establishment of this country. Still, it is worth reading:http://tinyurl.com/India-Today-Sahara-Oct-2011

These reports by various regulatory authorities point out that Sahara India is a nest of economic offences being committed in an ongoing way, channeling massive money flows between various entities and individuals without checks and balances. Sample verifications of individual investors in Mumbai carried out by SEBI personnel suggest that roughly 50% of the crores of people shows as the company’s investors exist only in books, but not in reality. This gives clear prima facie evidence of massive fund flows from (and to) unnamed investors, tax-haven countries, overseas crime rings, drug mafias, arms traffickers and, last but not least, corrupt politicians. This is not just another scam that will run its course, this is more likely to be a hand that is nurturing Maoist insurgents and jihadi terror groups, camouflaged in the patriotic colours of the Indian flag.

Sahara India is not just a harmless oddity to be tolerated with a smile; it is a wolf in sheep’s clothing. By remaining complacent despite the mounting body of evidence, each and every government of this country is committing an act of grave criminal negligence.

(Krishnaraj Rao is a prominent Right-to-Information activist and journalist based in Mumbai. He can be reached at thebravepedestrian@gmail.com)

The views expressed in this article are the author’s own and do not necessarily reflect BH’s editorial policy. 


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