Holding to account

The request of the Securities and Exchange Board of India (SEBI) to the Supreme Court for the arrest of the chairman and directors of the  Sahara group is the latest in the legal actions faced by the controversial group. SEBI has also sought a ban on foreign travel of senior officials of two group  companies.

The latest move follows another order for attachment of the assets of two companies and officials. The Supreme Court also had asked the two companies to return to investors Rs 24,000 crore which had been raised through a dubious and illegal instrument called optionally fully convertible debentures. The group has not complied with the court’s directives. It has been inventive in its disputation of judicial and regulatory directives and has created legal hurdles in their implementation.

The Sahara group has received adverse attention for years for a number of reasons. The sources of its huge funds have not been fully known and its operations have lacked transparency. It has functioned in a number of unrelated areas of business like hospitality and cricket and has seemed to have bottomless pockets. The genuineness of the identity of several lakhs of the depositors the group claims to have is in doubt. It has been alleged to have strong political connections and has flaunted them. While failing to repay its investors the company made two acquisitions abroad. This even raised suspicions of money laundering and violation of foreign exchange regulations. Sahara has used many means, employing its large financial resources, to ensure that it is not made accountable for its various actions which have for long been considered wrong or illegal.

It would be unrealistic to expect governments to take effective actions to deal with complaints about a group which has great financial clout and powerful connections. It is only the Supreme Court and institutions like SEBI which may be able to make sure that ordinary  depositors are given justice. But the company has challenged SEBI and attacked it, and has tried to dodge the court’s orders. It has now launched an ad blitzkrieg against SEBI. The regulator has been lax in the past about taking strong action against Sahara. It now seems to have stirred itself into some activity. Pressure must be kept up on the group in order to safeguard the depositors’ interests. Strong action against Sahara will also help to prevent occurrence of such cases in future.