The Complex Legacy of Subrata Roy, From The Great Highs To The Lowest Lows And Now The Question Of Over Rs 25,000 Crore Currently With SEBI

Born in 1948, Subrata Roy’s life took a turn after his father’s death, leading him to take charge of a struggling finance company, Sahara and transforming it into one of India’s largest conglomerates.

Sahara’s success reached its zenith in the 1990s; Roy’s leadership style, often described as cult-like, saw the company sponsoring major sports teams, owning iconic properties, and living a lavish lifestyle that mirrored his grandiose vision.

From Humble Beginnings to Financial Heights

Roy reportedly sold salted snacks on a scooter to support his family, displaying early signs of business acumen; taking charge of a struggling finance company, Sahara, in his 20s, Roy revolutionized its financial model in 1978, propelling the company to success. 

The once struggling firm, with a capital of a mere 2,000 rupees ($24; £19), transformed into one of India’s largest conglomerates by the 1990s, employing over a million private-sector workers.

Critics allege that Roy led his company like a cult, adopting titles such as the “chief managing worker” and guardian of the “Sahara parivar [family].” 

During its zenith, the company sponsored the Indian cricket team, owned a stake in a Formula One racing team (Force India), and possessed iconic properties like New York’s Plaza Hotel and London’s Grosvenor House (later sold).

A Life of Extravagance

Known for his lavish lifestyle, Roy enjoyed a regal existence. His fleet included private jets, helicopters, and luxury cars such as Rolls-Royces, Bentleys, and BMWs. 

His residences mirrored famous landmarks, with one mansion resembling the White House and another replicating Buckingham Palace. 

Roy also cultivated connections with India’s leading film stars and politicians. His sons’ 2004 wedding, attended by over 10,000 guests, featured chartered planes ferrying business tycoons, Bollywood celebrities, cricket stars, and fashion icons; even then-Prime Minister Atal Behari Vajpayee graced the occasion.

Legal Woes and Downfall

However, legal challenges befell Roy’s empire in the early 2010s. India’s Securities and Exchange Board (Sebi) began investigating Sahara after it failed to repay funds to investors. 

Two Sahara firms had raised 240 billion rupees ($3.9 billion; £2.3 billion) through bonds deemed illegal; despite Sebi’s assertion that Sahara had not refunded the money as ordered by the court, the group contended its liability was less, and it had adequately deposited funds with the regulator.

In 2014, Roy faced arrest for non-compliance with court appearances related to the case; he spent just over two years in jail and was granted bail in 2016. 

Subsequently, he maintained a lower profile, resurfacing in the media in 2020 when a Netflix series, “Bad Boy Billionaires: India,” revisited the stories of Indian businessmen who faced trouble after achieving success.

The Question Of Subrata Roy Sahara’s Rs 25000 crore with SEBI, will investors get their money back?

The passing of Sahara Group chairman Subrata Roy has brought attention to the substantial amount of over Rs 25,000 crore currently held by the Securities and Exchange Board of India (SEBI). 

This sum stems from regulatory actions against Sahara Group firms, particularly Sahara India Real Estate Corporation Ltd (SIREL) and Sahara Housing Investment Corporation Ltd (SHICL). 

SEBI’s 2011 directive mandated these companies to refund funds raised through Optionally Fully Convertible Bonds (OFCDs) from nearly 3 crore investors.

Following a prolonged legal battle, the Supreme Court, on August 31, 2012, upheld SEBI’s directive, compelling Sahara to deposit an estimated Rs 24,000 crore with SEBI for subsequent investor refunds. 

However, despite Sahara’s claim of having directly refunded over 95% of investors, SEBI’s latest annual report reveals a modest refund of only Rs 138.07 crore over 11 years to investors of the two Sahara Group firms.

As of March 31, 2023, the amount deposited in specially-opened bank accounts for refunds has surpassed Rs 25,000 crore. However, due to a lack of claims from a majority of bondholders, the total refunded amount by SEBI increased only marginally during the last fiscal year. 

Also, under various Supreme Court orders and SEBI’s attachment orders, SEBI has recovered Rs 15,646.68 crore as of March 31, 2023.

The Central Registrar of Cooperative Societies (CRCS) has initiated the refund process for Rs 5,000 crore to depositors in Sahara Group cooperative societies. 

In collaboration with the CRCS-Sahara Refund Portal, the government aims to return the funds to approximately 10 crore investors within nine months, as a Supreme Court order mandates.

THE ‘CRCS’ REFUND PROCESS

The Central Registrar of Cooperative Societies (CRCS)-Sahara Refund Portal has been developed to facilitate the submission of claims by genuine depositors of Cooperative Societies within the Sahara Group, including Sahara Credit Cooperative Society Limited, Saharayan Universal Multipurpose Society Limited, Hamara India Credit Cooperative Society Limited, and Stars Multipurpose Cooperative Society Limited.

The Supreme Court has been actively addressing various aspects of investor and depositor issues since August 2012 when it directed Sahara Group companies (SIREL and SHICL) to create an escrow account and deposit funds for subsequent return to investors. As of this year, the amount available in these accounts has risen to Rs 24,979.67 crore.

In February, the Central Government filed an application before the Apex court to transfer Rs 5,000 crore from the unutilized amount of Rs 23,937 crore (lying in the “Sahara-SEBI Refund Account”) to be disbursed against the legitimate dues of depositors in Sahara Group Cooperative Societies.

The government and investors allege that money siphoned from Sahara group companies was “laundered” and reflected in the books as “small deposits in the Sahara Cooperative societies,” including deposits from small-time investors such as farmers and labourers.

The Question Of Small Depositors?

In response to the Supreme Court’s order on March 29, Rs 5,000 crore is directed to be transferred out of the “Sahara-SEBI Refund Account” to the Central Registrar of Cooperative Societies (CRCS) for disbursement to the legitimate dues of genuine depositors within the Sahara Group of Cooperative Societies.

The disbursement process, mandated by court orders, is supervised and monitored by Justice R. Subhash Reddy, former Judge of the Supreme Court, with the assistance of Gaurav Agrawal, Amicus Curiae, as per the directions of the Supreme Court. Four senior Officers on Special Duty (OSDs) have also been appointed for each of the Societies to assist in the refund process.

The CRCS-Sahara Refund Portal, launched on July 18, incorporates necessary checks and balances to ensure that only the legitimate deposits of genuine depositors are refunded. Depositors need to submit their claims through an online application form available on the portal, along with the requisite documents.

Verification of depositors is carried out through their Aadhaar card to confirm their identity. After the verification of claims and uploaded documents by the appointed Societies, Auditors, and OSDs, payment to genuine depositors is credited to their bank accounts within 45 days after filing their online claims, subject to fund availability. 

The status of the claims is communicated to depositors through an SMS.

Depositors are required to provide details of their Aadhaar-linked mobile number and bank account, along with the necessary documents as proof of their claim and deposits.

How Big Are The Deposits?

As per information submitted to the Delhi High Court in 2021-22, Sahara Credit Cooperative Society Ltd. received deposits of Rs 47,245 crore from approximately 4 crore depositors. 

Saharayan Universal Multipurpose Society Ltd. obtained contributions amounting to Rs 18,000 crore from around 3.71 crore members. Stars Multipurpose Cooperative Society Ltd. received contributions amounting to Rs 8,470 crore from approximately 37 lakh members, and Humara India Credit Cooperative Society Ltd. secured deposits of Rs 12,958 crore from around 1.8 crore members.

The total deposits disclosed by these four cooperative societies, as per their management, amount to approximately Rs 86,673 crore. In total, there are about 10 crore depositors whose funds were entrusted to Sahara group companies.

Final data regarding refunds from the Government CRCS portal is not yet publicly available. A press release by the Ministry of Cooperation on August 4 mentioned that 33 lakh investors had registered on the portal, with refunds issued to 112 depositors of Rs 10,000 each by August 4.

Further developments and data are expected to be submitted to the Supreme Court in December, with the court calling for regular status reports on the matter. However, sources have indicated that the actual work on refunds and verification is progressing slowly due to the lack of documentation kept by Sahara Group Companies and Societies.

While the web portal utilizes Artificial Intelligence and machine-readable forms for cross-referencing documents, nearly 80 per cent of files are reportedly stuck due to discrepancies in company documents, causing delays in cross-verification. Ministry of Cooperation staff is reportedly working round the clock to address the substantial workload.

The initial plan was to expedite disbursements for persons claiming under Rs 20,000, which would include farmers, laborers, etc. However, identifying fictitious claims has proven challenging, as noted by a source familiar with the process.

What’s To Happen Now?

The SEBI and CRCS procedures are ongoing, and investors and depositors can continue registering on the web portal to claim refunds. Given that these are court and regulator-mandated procedures, the passing of “Saharashri” is not expected to impact the ongoing process.

The Last Bit, Subrata Roy’s life encapsulates the duality of extraordinary success and legal adversity. His ‘rags-to-riches’ tale is woven with stories of luxury, sponsorship of major events, and iconic property ownership. 

Simultaneously, the legal battles with Sebi cast a shadow over his illustrious career; in death, Subrata Roy leaves behind a complex legacy, symbolizing the challenges that can accompany meteoric success.