ETHICAL ISSUES AND UNETHICAL PRACTICES OF

SAHARA INDIA GROUP.

for
Mid-Term Assignment in BE & CSR

By
SUDHANSU SEKHAR MISHRA
19PGPMWE58

Under the guidance of

Prof. Samar Singh
BE & CSR

Indian Institute of Management Raipur

Contents
ABSTRACT ............................................................................................................................................... 3
INTRODUCTION: - ................................................................................................................................... 4
SAHARA INDIA: - ..................................................................................................................................... 4
GROWTH AND PHILOSOPHY OF SAHARA: - ........................................................................................... 5
REGULATORY BODIES: -.......................................................................................................................... 5
BACKGROUND OF SAHARA FRAUD: - .................................................................................................... 6
How It Starts: - .................................................................................................................................... 6
SEBI Vs SAHARA: - .................................................................................................................................. 6
SAHARA AT HIGH COURT: - .................................................................................................................... 7
SAHARA IN NEWS CHANNEL: - ............................................................................................................... 8
The Economic Times: -........................................................................................................................ 8
Live Mint: - .......................................................................................................................................... 8
LEARNINGS FROM SAHARA CASE: - ....................................................................................................... 9
CONCLUSION: - ..................................................................................................................................... 10
Exihibit-1:- Letter of SEBI to Ministry of Corporate Affairs, Govt. of India regarding OFCD issued by
SIRECL & SHICL on dated 21st Apr 2020. .............................................................................................. 11
Exhibit-2 :- Balance Sheet of Sahara Housing Investment Corporation Ltd (SHIC) ........................... 12
Exihibit-3:- Public Notice by SEBI to the Investors of Sahara India Real Estate Corporation Limited
and Sahara Housing Investment Corporation Limited. ....................................................................... 13
Exihibit-4: - Public Notice by SEBI to the Investors regarding OFCDs of Sahara India Real Estate
Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL)........... 14
REFERENCE: - ........................................................................................................................................ 17
 ABSTRACT

Ethical Issues and Unethical Practices of Sahara India Group

By
SUDHANSU SEKHAR MISHRA

The purpose of the study how money laundry done by Sahara. How SEBI came to know about
two companies of Sahara were doing business in wrong ways by cheating SEBI. The ethical
issues raised against Sahara. The investors who were losers and Sahara not paying the money
to the investors as promised. The case brief about how company destroys by practicing
unethical. How Supreme court reacts against Sahara scam.
INTRODUCTION: -

In current economic and social environment ethics issues are gaining more importance
specially in business. Such ethical issues put the business organization unstable and sometimes
it destroys the whole organisation.
Being socially responsible the business industries need to incorporate Corporate Social
Responsibility (CSR) to understand and mitigate social and environmental impact towards
business. The company need to interact with its customers, internal and external stakeholders,
shareholders, investors and community.

SAHARA INDIA: -

Sahara India Pariwar was formed on 1978 by Mr. Subrata Roy. The headquarter of Sahara
framed at Lucknow. Sahara doing his business in multisegmented like Infrastructure &
housing, Sports, retail and finance and information technology. In time after Indian railways,
Sahara was the second largest employment generation organization which led behind Tata and
Reliance. The number of employees were working with Sahara Group around 14 lakhs.
The industries that came under Sahara India Pariwar were as: -
Finance: - The Financing companies that are associated as Sahara India Life Insurance
Corporation Limited, Sahara Housing Corporation Ltd and Sahara Asset Management
Company Pvt ltd.
Infrastructure & Housing: - Aamby Valley City, Sahara City Homes, Sahara Grace, Sahara
Star, Sahara Hospital, Sahara India Power Corporation ltd.
Consumer Merchandise FMCG Retail Venture: - Sahara Q-shop.
Luxury Real Estate & Lifestyle Services: - Qing City
Dairy and Hospitality: - World’s largest fully integrated dairy farm with 68 lakh litres/day , 2.5
million tonnes/year. Macedonia for hospitality project.
Media and Entertainment: -

, , , , , ,

, , , , , ,

, .
Manufacturing: - Sahara Araria Jute Project, Mastercraft.
Information technology: - Sahara Next.
International Hotels: - Grosvenor House in London, Piaza Hotel in New York, Dream Hotel in
New York.
GROWTH AND PHILOSOPHY OF SAHARA: -

In 1978, Sahara started as a seed with capital of rupees 2000/- only. But now-a-days the market
value of Sahara group is around Rs. 1.4 lakh Crores. Since last 34 years no complaint has been
received in non-payment to its employee. The main concept of growth was No Boss concept.
All the directors, shareholders, investors of the company were from worker’s rank. The main
aim was to achieve high productivity over several years.
The directors, shareholders had taken oath in affidavit in the law of court that neither they nor
their family member can ever share the company’s profits. Hence in last 34 years no profit and
also not a single dividend issued. Among total profit 35% of profit Sahara kept by himself,
40% they spend on welfare of their workers and 25% of profit they were spending on Corporate
Social Responsibility (CSR).

REGULATORY BODIES: -

The regulations and regulatory bodies that came to play as discussed below: -
OFCD: - Optionally Fully Convertible Debentures (OFCD) is one type of debentures where
the investors have rights to convert their OFCDs to Equity and shares where by purchasing the
investor could became share-holders of that company. Debenture is a debt loan instrument. If
any company issued OFCD less than 50 peoples then the company need to take permission
from Register of Companies (ROC). And when the company issued OFCDs for more than 50
people then the company need to take prior approval and to register under SEBI.
SEBI: - Security and Exchange Board of India is the regulator body for the security and
commodity market of India. SEBI was formed on 12th April 1992. Security and Exchange
Board of India (SEBI) was responsible for three groups as – Issuer of Securities, Investors, and
Market Intermediaries. SEBI had the power for approve the laws of Security exchanges and
amend the by-laws whenever required.
IPO: - Initial Public Offering (IPO) is the process where any company can offer their share to
public for first time for generating funds. IPO is the process where any company can be listed
on stock markets.
COMPANY ACT:- This act is called as Company Act, 2013. It extend to the whole of India.
SECTION -55A:- no such shares shall be redeemed except out of the profits of the company
which would otherwise be available for dividend or out of the proceeds of a fresh issue of
shares made for the purpose of such redemption.
SECTION-67:- No company limited by shares or by guarantee and having a share capital shall
have power to buy its own shares unless the consequent reduction of share capital is effected
under the provisions of this act.
BACKGROUND OF SAHARA FRAUD: -

In 2008 two industries of Sahara India group like Sahara India Real Estate Corporation Ltd
(SIRECL) and Sahara Housing Investment Corporation Ltd (SHIC) has been issued Optionally
Fully Convertible Debentures (OFCD) about 24,000 crore rupees. OFCD is one type of
financial instrument at start you engaged with company as lender, company borrows money as
loan and return with interest. At maturity you can collect your money in two ways either receive
principal back or become share holder by purchasing shares.
In 2008, Reserve Bank of India (RBI) passed one petition on Sahara Group to stop all business
activities forthwith and repay all the deposits to investors immediately. This was the first such
type of order after 1947 (independence) to Sahara group. Reserve Bank of India (RBI) files
petition against Sahara but before going in detail supreme court’s decision goes in favor of
Sahara. But Reserve Bank of India (RBI) not satisfied on above case and conducted a special
audit against Sahara. The audit conducted almost 15 branches of Sahara. In the audit reports
there were no such type of issues reported by the auditors against Sahara.
In 2009, Sahara Prime City Ltd applied for listing of share in Security & Exchange Board of
India (SEBI). Then SEBI studied the file and detailed about the SAHARA Group and able to
found that SIRECL and SHIC issued OFCD (Exihibit-1). SEBI asked how they have collected
around 24,000 crore rupees from approx. 3 crore people without listing in SEBI. Under
company Act, if any company collects money from publicly then that company should register
under SEBI. Under such case these two companies i.e SIRECL & SHIC was not listed under
SEBI.
The intention of company was to carry out its infrastructural business and the amount collected
by such would be utilized in financing for the completion of projects like railway, airports and
others allotted to Sahara.

How It Starts: -

In Jan 2010, Roshan Lal who resides at Indore wrote a letter to National Housing Bank
regarding bond issued by two companies of Sahara Group. Mr. Roshan Lal was CA he wrote
in fact that he found these two companies had issued large number of OFCDs to investors
without obeying rules. The National Housing Bank did not have rights to investigate about
such matter so they forwarded the letter to SEBI for further investigation.

SEBI Vs SAHARA: -

After investigating about Sahara, SEBI found that there were some corruption going on. SEBI
asked Sahara you return all the amount that you had collected from market with 15 % interest
to SEBI along with records of all investors so SEBI will return all the money to investors.
Sahara told that they have not collected money from market rather they have issued OFCD to
their Employees, Ex-employees, relatives and other known persons. But SEBI did not agree
upon that. As per Sec 67 of company act if any company collect fund from 50 or more than
that people then it will be deemed as public issue and for public issues company must register
under SEBI. Sahara counter act to SEBI under sec-55A of company act as SEBI have control
on only listed companies. Along this Sahara launched a petition on Allahabad High court
against SEBI that SEBI makes Sahara trouble and received case in favour. Then SEBI put one
petition at Supreme Court against Sahara.

SAHARA AT HIGH COURT: -

The Supreme Court directed Sahara to publish all the details of OFCDs issued to investors.
And also refund all the amount in three instalments with in the specific time and give rights to
SEBI for freeze all accounts and properties of Sahara.
Sahara Gives Two statement near Supreme court: -
Sahara have deposited of 24000 Cr and will repay the whole amount soon; this statement was
considered as true. Another statement that Sahara had paid back approx. 90% of their deposits
to investors but Securities and Exchange Board of India (SEBI) did not agree on this point and
told as false statement by Sahara.
Supreme court directed Sahara to submit all the documents within 10 days near Securities and
Exchange Board of India (SEBI). And Sahara also arranged all the documents and sent through
127 trucks near Securities and Exchange Board of India (SEBI) that contains all information
about 3 million investors. But in the 11th day, Sahara sent the truck to Securities and Exchange
Board of India (SEBI) that were returned as the timeline given to Sahara finished.
SEBI Director (Mr. K.M Abraham) put a fact near the court that according to the report of
2009, total investor in India having D-mat account was nearly 15 million and largest company
with maximum capitalization available with nearly 4 million of investors. But according to the
report of Sahara they have issued around 30 million of investors that means double to the
investors available. And the question raised how Sahara did this. In Nov 2012, Sahara paid its
first instalment of rupees 5120 crores. And Sahara presented that from Apr 2012 to June 2012
they have payed around 16,000 crores rupees to investors. For that the people did not react on
SEBI’s letter (SEBI sent letter to all the investors about the self KYC submission for money
refund) (Exihibit-3,4). For this Supreme court countered Sahara for this repayment and further
questioned how they get such a huge amount (i.e 16,000 Cr.). Finally, the Chairman Mr.
Subrata Roy along with two directors arrested against contempt of court and put in jail as they
did not pay two instalments.
On 28th February 2014, Mr. Subrata Roy Chairman of Sahara India Pariwar got arrested by
Uttar Pradesh police on Supreme court’s warrant. Then he got a bell on 26th March 2014 by
showing his mother was in very bad health condition and wanted her elder son stand by her
side. For this time Mr. Subrata Roy deposited rupees 10,000 crore near SEBI. As per study
after August 2014, Mr. Roy again in jail and trying to sell few of their hotels to earn more
money.
SAHARA IN NEWS CHANNEL: -

The Economic Times: -

On March 05, 2014, the chairman of Sahara Group Mr. Subrata Roy put in Tihar jail like other
prisoner. He put with 3 more prisoners in same cell. As he was about more than 60 years old,
so one bed has been provided to sleep. He ate the food provided by Jail. The jail authorities
treated Mr. Subrata Roy as other prisoners. Along with Mr. Subrata Roy two more directors
Ravi Shankar Dubey and Ashok Roy Choudhary also been put in jail. The woman director Mss.
Vandana Bhargava was free from custody.
On Jun 19, 2015, Supreme court declined to relax the condition of bail like deposition of 5000
Cr rupees in cash to SEBI and 5000 Cr of bank guarantee. And also mentioned then payment
of 36,000 Cr rupees in 18 months of time interval. Kapil Sibal reported that Sahara unable to
furnish the bank guarantee as the financial company who agrees to provide had backed as SEBI
fixed the trigger point for encashment. The court said as Sahara has to pay huge amount to the
investors so the firm bound to discharge the whole amount by SEBI. The court also said to
Sahara that they have to pay eight instalments of rupees 3000 Cr which need to pay every two
months interval. And also told to Sahara if they fail to deposit the whole amount near SEBI
then the chairman Mr. Subrata Roy along with his directors took back custody.

Live Mint: -

On 12th Feb 2020, Mr. Subrata Roy has been assured to all its investors that they would able
to get their amount with full of interest as mentioned along with additional interest for the delay
in payment. Mr. Subrata Roy discussed with two large foreign investors in real estate and city
development businesses. And he also deposited rupees 22,000 Cr near SEBI.
Mr. Subrata Roy issued one letter to their investors on 42nd foundation day which was
celebrated on 1st February. Mr. Subrata Roy also mentioned that the whole amount collected
through sale or mortgage of Sahara assets and from the joint ventures had been deposited in
SEBI-Sahara account. Out of this they cannot use any single amount for their organizational
work and or repayment to its esteemed investors as per the statement of Mr. Subrata Roy. All
keeping in mind the directions received from Supreme court that this year all the Sahara’s
problem need to resolve. As the data received on February 1,2020 Sahara has deposited rupees
15,448.67 Cr in SEBI-Sahara Refund account. And also a cheque of rupees 41.59 Cr has also
been deposited by Sahara group in late January.
Minister of State for Finance Mr. Anurag Thakur told that SEBI had received total 19,560
application of total 53,361 bond certificates. This has an aggregate amount of rupees 109.86
Cr (58.52 Cr as principal and 51.34 Cr rupees as interest). As per last annual report on 31st
March 2019, SEBI had deposited rupees 20,173 Cr amount along with interest for refund to
investors in Sebi-Sahara Refund account.

LEARNINGS FROM SAHARA CASE: -

This case described about the Social irresponsibility of Sahara Group towards its investors and
failed to build the corporate governance mechanism of Sahara group. It impacted on both the
rule/ regulation makers and followers.
Was India’s regulatory framework framed for consistently detect, stop and penalise such type
of organization frauds? The order of court points out how two companies of Sahara Group
(SIRECL and SHIC) prepared a pre-planned attempt to bypass the regulatory and
administrative authority in the Security and Exchange Board of India (SEBI). The regulator
must raise concerns about the issues and highlight in front of court for their victory.
Secondly, the case focus on the issue that collected by intelligence in co-ordination with
different financial sector regulators. The money laundering activity of Sahara Group banned
all para-banking activities of Sahara Group by Reserve Bank of India (RBI) on 2008. Securities
and Exchange Board of India (SEBI) alerts two companies of Sahara Group for regulating the
public legal / ethical issues. Insufficient level of interaction found between different financial
sectors. More co-ordination required to up rooted from ground level.
Securities and Exchange Board of India (SEBI) had to investigate about the truth of the case.
As Sahara told that they have to pay 24,000 Cr rupees to their investors Securities and
Exchange Board of India (SEBI) got agree on their point and set that amount as benchmark.
But Securities and Exchange Board of India (SEBI) had the rights for the detailed investigation
about the report.
Almost 30 million of estimated Sahara subscribers / investors are might be fake or it may also
possible some fake subscribers / investors might be mixed with the real subscribers / investors.
The market regulators unable to found the investors of more than 10 crores. As most of the
subscribers / investors were fake in Sahara case so Securities and Exchange Board of India
(SEBI) need to handover the case to some other party for detailed investigation and focus on
real investors by himself. If Sahara could able to proof the repayment to its investors then
Sahara chairman Mr. Subrata Roy along with its two directors might not go to jail.
All about this case of huge Money laundering should be eye opener of Income tax department
to look after such cases. The different regulation authorities must act on the fact for reduction
of duplication and how can deploy the available resources in perfect ways.

CONCLUSION: -

The fraud of Sahara Group can be eye opener in various aspects. The uncertain dealings that
takes place inside the corporate chamber that must need to come Infront of various investors
those who invested their earned money (collected by hard work) to such type of socially
irresponsible and corrupted industries.
The Money laundry was very crucial cases and all the naxalbad and terrorism will get money
from such activities.
Securities and Exchange Board of India (SEBI) proved its effective mechanism by taking the
case and solved by taking help of supreme court for final outcome. But Securities and Exchange
Board of India (SEBI) did not have power to regulate the unregistered companies. They are
doing the money laundry wisely. One of the reasons for such big scandal are lack of
transparency, political involvement and also ignorance of investors.
In respect of Sahara Fraud case it was the responsibility of government to regulate such type
of industries and protect the investors and nation from such type of social irresponsible
industries by taking necessary steps empowering Securities and Exchange Board of India
(SEBI) and if necessary, might some other regulatory bodies.
Exihibit-1:- Letter of SEBI to Ministry of Corporate Affairs, Govt. of India regarding
OFCD issued by SIRECL & SHICL on dated 21st Apr 2010.
Exhibit-2 :- Balance Sheet of Sahara Housing Investment Corporation Ltd (SHIC)

Balance Sheet - SHCL

In Crs

Particulars Mar-19 Mar-18 Mar-17 Mar-16

Liabilities 12 months 12 months 12 months 12 months

Share Capital 7 7 7 7
Reserves & Surplus 33.21 31.08 28.51 26.53
Net Worth 40.21 38.08 35.51 33.53
Secured Loan 35 35 35 5
Unsecured Loan 36.65 61.65 68.65 101.74
Total Liabilities 111.86 134.74 139.16 140.27
Assests
Gross Block 2.4 2.34 1.85 1.96
(-) Depriciation 1.35 1.32 1.35 1.43
Net Block 1.05 1.02 0.5 0.53
Capital Work in Progress 0 0 0 0
Investments 0.02 0.02 0.03 0.03
Inventories 0 0 0 0
Sundry Debtors 0.16 0.11 0.1 0.17
Cash And Bank 22.03 12.47 20.85 21.25
Loans and Advances 117.17 124.08 121.83 122.27
Total current Assests 140.43 137.7 143.31 144.25
Current Liabilities 28.36 2.37 2.39 3.59
Provisions 0.21 0.59 1.76 0.39
Total Current Liabilities 28.57 2.96 4.15 3.98
Net Current Assests 111.86 134.74 139.16 140.27
Misc. Expenses 0 0 0 0
Total Assests 111.86 134.74 139.16 140.27
Exihibit-3:- Public Notice by SEBI to the Investors of Sahara India Real Estate
Corporation Limited and Sahara Housing Investment Corporation Limited.
Exihibit-4: - Public Notice by SEBI to the Investors regarding OFCDs of Sahara India
Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment
Corporation Limited (SHICL).
REFERENCE: -

1. https://economictimes.indiatimes.com/news
2. https://www.livemint.com/
3. https://www.sahara.in/index.html
4. https://www.sebi.gov.in/filings/public-issues/oct-2009/sahara-prime-city-limited_3696.html
5. http://www.onlinejournal.in, ISSN: 2454-1362
6. en.m.wikipedia.org/wiki/SAHARA