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Sahara Failure Analysis
Sahara Failure Analysis
Sahara Failure Analysis
Overview:
This case is about Sahara group which did a fraud with their investors. Company failed to comply with a Supreme Court order in 2012 to repay investors in the bond scheme, which the court has said was illegal. With this regard Delhi police arrest Sahara group owner Subrata Roy in march 2014 and to appear in court over failure of two Sahara companies to pay Rs 19,000 crore by way of dues to be paid to investors.
Fraud:
The lawsuit concerns two unlisted Sahara group companies which started raising funds in 2008. After the Indian market regulator intervened, the Supreme Court told the company to repay more than $3 billion with interest to its millions of investors. But market regulator SEBI brought contempt proceedings against Roy and Sahara for failing to comply with the courts order. Saharas investment programme includes schemes that are similar to a typical Indian banks fixed or recurring deposits. The company largely sells such schemes to small investors in towns and rural areas through their network of agents. These financial products allow investors to deposit small amounts such as 50 rupees a day for returns that some agents and investors said are higher than what bank deposits generate. While there is no official company website which explains Saharas investment schemes, agents and investors used names such as M-Benefit and Minor to identify some of the schemes. Sahara also issues a computer printed receipt with hologram and passbooks as proof of investment, according to documents seen by this reporter. The public notice comes after RBI received complaints from individuals that the Sahara group is mobilizing money from the public under the generic name of Sahara Pariwar and Sahara India Pariwar. These two companies are not registered under RBI. Only three Sahara group entities are registered with RBI -- Sahara India Financial Corp. Ltd (SIFCL), Sahara India Corp Investment Ltd (SICIL) and Sahara India Infrastructural Development Ltd. (SIIDL).Of these three entities, SIFCL, a residual non-banking company, has been directed by RBI to phase out acceptance of deposits from the public. SICIL and SIIDL are not authorized to accept deposits from the public.
-SAT upheld SEBI order against Sahara to refund money in October 2011. -A Supreme Court bench ruled in favour of SEBI and ordered the two Sahara companies to return its OFCD investors the full outstanding amount with interest. -Later on, SEBI approached Supreme Court alleging Sahara's non-compliance with the main order. -The Sahara Group got a temporary reprieve from Supreme Court as it granted more time to repay the money. -Sahara missed the repayment deadline set up by court and it was required to submit Rs 10,000 crore by January first week in 2013. -SC refuses to hear a plea asking for extension of deadline to refund investors money. -SEBI files a contempt petition against Sahara in SC saying that the company was flouting SC direction to make refunds as soon as possible. High drama marked the police action as the police conducted searches inside the residence. The order to arrest Roy was issued for his failure to appear before the apex court in a contempt case arising out of non refund of Rs 20,000 crore to investors by two of his companies.
Conclusion:
When sebi comes to know about the Sahara fraud, it takes immediate action. There were wrong schemes of Sahara which makes investors worried. The fraud is about those companies under which those schemes are running; actually those Sahara companies are not registered from RBI. But Sahara didnt responded fairly and Sahara every times delays court orders and continues with these schemes. Later on court ordered nonbailable arrest warrant against Subrata Roy which leads Subrata Roy into Tihar jail for non-payment of Rs 19,000 crores to investors.
References:
http://www.livemint.com/Politics/Ql2h03y9WkRJHPEpMJ3XMN/RBI-warns-investors-against-SaharaIndia-Pariwar-deposits.html http://blogs.reuters.com/india/2014/03/07/investors-fear-for-their-deposits-after-sahara-chiefs-arrest http://articles.economictimes.indiatimes.com/2014-02-21/news/47528340_1_sahara-india-two-saharacompanies-ravi-shankar-dubey