Sahara case: Sebi foxed by ghost investors; seeks foreign help

Sahara case: Sebi foxed by ghost investors; seeks foreign help

Sahara case: Sebi foxed by ghost investors; seeks foreign help

As Sebi sifts through "hopelessly mixed up" documents submitted by Sahara, chances remain very low of finding genuine investors and the market regulator suspects it to have provided details of mostly "ghost or fictitious" investors.

Making things worse, there has been a considerable delay in response from central agencies and state governments from whom Sebi has been seeking assistance for attaching Sahara group properties for almost a year, sources said.

Notwithstanding these hiccups in such a high-profile case in which Sahara chief Subrata Roy has been taken into police custody for being produced before the Supreme Court on March 4, Sebi is seeking help from its peers in foreign countries such as Mauritius, the UK and the US.

It is also seeking help of some other jurisdictions, where Sahara is said to have presence through business ventures or shell companies.

Besides help in administrative matters, the overseas regulators may also be tapped for sharing intelligence on the ventures set up by Sahara in various jurisdictions.

As majority of investor accounts, from about 3 crore listed out by Sahara, not turning out to be genuine, there is a suspicion about possible money laundering activities, a senior official said, adding that other regulatory agencies would need to play a more active role in such a scenario.

Even among those who so far appear to be genuine investors and whose numbers could reach a few lakhs at most, a majority are in the "multiple investor" category. Refunds have been made as yet only for "individual genuine investor" accounts.

While Sahara has accused Sebi of going slow on repayment process despite Rs 5,120 crore having been deposited with it, senior officials said that the refund task is too complex and the group has not been very forthcoming when asked to cooperate in investor verification.

The group claims that Sebi has not sought its help in verifying investors.

While genuine investors not finding multiple mentions and those not listed against multiple accounts are being repaid their investments, Sebi will soon ask the Supreme Court about the "genuine multiple investors" or those having multiple deposits.

These investors would begin getting their refunds after the Supreme Court go-ahead in this regard.

While Sebi has not disclosed any official figure for the refunds made so far, Sahara group claims that the total refund so far is just about Rs 1 crore.

Sebi has also set up a special team of officers to deal with refunds. An Officer on Special Duty and other dedicated officers may deal with the objections and claims relating to the Sahara properties to be sold and for conducting the sale of the property to garner funds for refunding the investors' money.

An initial pilot study conducted by Sebi for ascertaining the genuineness of investor documents submitted by Sahara had found that close to 99 per cent of the bondholders were untraceable.

The ratio has not improved much since then, sources said. Under the pilot programme, Sebi sent out redemption notices inviting claims to more than 21,000 bondholders but it received less than 300 claims. While more than 7,000 notices returned undelivered, there was no response in respect of over 13,000 notices.

Sebi had referred these cases and many others at a later stage to Sahara for further verification, but not much headway could be made.

With regard to the pending payment of about Rs 20,000 crore from Sahara firms, Sebi is of the view that the group has not been able to establish its claims of have repaid this amount directly in cash to investors.

Among others, Sebi had asked Sahara firms to explain payments made by Sahara Credit Cooperative Society (Rs 13,366 crore), Sahara India Commercial Corp Ltd (Rs 4,384 crore), Sahara Q Shop (Rs 2,258 crore), Ketak City Homes (Rs 19 crore) and Kirit City Homes (Rs 44 crore) on behalf of Sahara India Real Estate Corp Ltd.

Similarly, the group has been asked to explain payments of Rs 2,479 crore by SICCL and Rs 2,412 crore by Sahara Q Shop on behalf of Sahara Housing Investment Corp Ltd.

The group was also asked to provide bank statements of these companies to verify the payment claims, but they later said that all payments were made in cash. It also claimed that such large-scale dealings were possible with its vast network of branches.

Sahara has said Sebi "does not want to understand the spread of our network into 4,700 centres" and the average daily payment at each branch of about Rs 2.5 lakh.

Soon after the arrest of Roy on February 28, Sahara group again claimed it has cleared all but about Rs 2,000 crore of its liabilities towards bondholders, and accused Sebi of going slow on verifying accounts.

The group also said that Rs 20,000 crore was being demanded from it as "security" because the Supreme Court has said that "after verification of Sebi, if there are partially or fully fictitious accounts then that amount will go to Government account".

"But in the last 17 months, Sebi has not done even 1 per cent verification. It is a great strategy of Sebi and that is why the sword is continuously hanging over us," Sahara claimed.

The group has been engaged in a long battle with Sebi with regard to investor refund of more than Rs 24,000 crore, which Sebi found that the group's companies had raised through "various illegalities" by issuing bonds known as OFCDs (Optionally Fully Convertible Debentures).

Sahara said that Sebi has been given all original payment vouchers, receipts and all other documents containing details of investors in more than 100 truck loads.

It said that 20-30 truck load documents were still in a Mumbai godown, but Sebi has refused to receive them.

Sebi has earlier said that the group had failed to submit the documents within a deadline set by the Supreme Court.

With regard to Rs 5,120 crore deposited with Sebi, the group claimed said that the regulator has disbursed only about Rs 1 crore in the last 16 months.

Sebi had begun the refund process in May 2013 by inviting claims from genuine investors, after getting a go-ahead from the Supreme Court in this regard.

Since then, it has been providing regular updates to the court and the documents provided by the companies have been of little help and many of the entries have been made for "ghost" accounts as attempts to trace those investors have turned futile.

Sahara, on the other hand, claimed that there was no payment demand from investors and there would have been "at least one complaint" if there were dues pending.

"Had there been non-payment situation there would have been bloodbaths and suicides," the group claimed.