Sahara to SEBI: Expedite investor verification, ads won't help

Hitting back at Sebi, embattled Sahara group today said issuance of advertisements would not help the regulator reach out to the investors spread across remote parts of the country and offered its help in verifying 95 per cent bondholders it claims to have already refunded. 

"The proof of the pudding is in eating. Sahara is confident that verification will prove not only the existence of the investors but also Sahara will get all its money which is with Sebi," the group said in a statement.

This follows comments made by Sebi's Whole-Time Member S Raman yesterday on the sidelines of a conference in Mumbai, where he wondered why not many claimants were coming forward to get back the money in the high-profile Sahara case.

"As far as Sahara is concerned, we have a decent amount of money but not many claimants. That is a question mark, as to why there are no claimants despite the fact that we have made multiple advertisements seeking applications to pay the money," he had said.

Terming his comments as "misguiding and irresponsible", Sahara accused Sebi of indulging in 'media trial' on Sahara- Sebi matter when the case was 'sub-judice'.

It said the regulator was not finding many claimants because "Sebi in four years has not initiated on-ground verification of the investors".

The group further said that Sebi has issued four newspaper advertisements directed towards only those investors who have yet to get refund. But, "the majority 95 per cent who have already got back their money are neither addressed in these advertisements nor will they anyway, bother to reply to Sebi (even if asked) as they have already got their money refunded from Sahara."

"Besides, it is imperative to understand that almost entire majority of Sahara investors (including the remaining 5 per cent investors) reside in the remote parts of rural India and are mostly illiterate or barely literate.

"Many of them live in mud houses, hutments and even slums, where there are no street names or house numbers (as there are no municipalities in small villages to allot house numbers, etc). Therefore, instead of merely issuing advertisements, a more serious and detailed approach should be adopted by Sebi to reach out to our investors," it said.

The group further said "Sahara with its more than 12 lakh workers has an unparalleled reach to investors".

Citing the Supreme Court order that Sebi can take help of Sahara for verification of investors, the group said, "It is not possible to reach out to these small investors and Sahara is always ready to assist Sebi in reaching out to the aforesaid investors."

Sahara is engaged in a long-running dispute with the Sebi over schemes involving raising of funds from public through certain bonds and the group was asked to return thousands of crores along with interest to the investors through the regulator.

"The entire desire of ours is to distribute as much money as possible," Raman had said.

Reacting to Raman's comments about Sahara giving truckloads of documents not connected to one another and the regulator undertaking the gargantuan task of sifting through those, Sahara said the group was asked to send all the document pertaining to 3 crore investors to Sebi in 10 days.

"The OFCD (bonds through which money was raised) was not closed and in fact in process of refund to a large number of investors was on. In this scenario many of the document were at our head office while a big number of documents were at our more than 4,000 branches.

"Keeping in mind the time limit of 10 days, we collected all the original documents as it is from all our offices across India and had sent the same to Sebi is boxes through 127 trucks," Sahara said in a detailed statement.

Stating that there was no fault on Sahara's part, it further said, "The documents of 3 crore investors cannot be handful and quite understandably will be huge in number because it contains the proofs of repayments of three crore investors - original repayment vouchers, receipts, KYC and other relevant documents.”

"Further, Sahara had in fact offered Sebi to help in the collation of documents and stationed its 50 officials in Sebi's Mumbai office to assist the market regulator. We were even ready to increase the number of officials to many hundred, but Sebi has refused to take their help. "Moreover, Sebi refused to take around 25 per cent of the documents which are still lying in our warehouses in Mumbai," it added.

It further accused Sebi of not having made "any serious effort" to start the verification even after two years of having claimed to have successfully organized the documents.

It further asserted that verification of "documented proofs" provided by Sahara would prove that all its "investors actually exist".

The group said the amount deposited so far with Sebi is more than Rs 14,000 crore, including interest earned, and recently it has given additional Rs 500 crore, though Sebi has refunded only Rs 55 crore.

Sahara’s Rs. 12,000 Crores are already with SEBI

Sahara says that report of Due amount of Rs 40,000 Cr is incorrect, since such amount or such observation was never made during the course of hearing either by the Counsel appearing for SEBI or by the Hon’ble Court or any other Counsel. The figure of Rs. 40000 Cr. is imaginary and same amounts to irresponsible reporting of Court proceedings. There is no pleading or any document in the Court record which mentioned the figure of Rs. 40000 Cr. The order dictated in the open Court on 13.03.2015 also does not bear this figure and therefore, these amounts to incorrect reporting of Court proceedings which further dented the image of Mr. Roy and two directors in the public eye.

2.      In fact, the Court very fairly stated that amount payable was subject to verification and after verification all excess amount would be refunded Back to Sahara.

3.      There is no observation pertaining to the reporting of one month to save group by the Hon’ble Court, same is misconceived.

As a matter of fact, the Hon’ble Court observed during the proceeding to Mr. Kapil Sibal, Senior Advocate that the outhouse facility along with secretarial staff etc. can be extended even up to “two months” provided a concrete proposal is put forward as far as the satisfaction of the bail bond of rest of the amount of about 6000 Cr. is concerned. Please note that Sahara's two companies are asked to provide proposal for complying with the remaining amount out of bail amount of Rs. 5,000 Cr cash (out of which Rs. 4,000 Cr. cash has already been paid to SEBI) and Rs. 5,000 Cr. as bank guarantee and not for any imagery figure of Rs. 40,000 Cr.  The period of 2 month was observed by the Hon’ble Court when Mr. Sibal requested for 8 weeks outhouse facility to finalize the transaction to satisfy the bail bond amount of Rs. 10,000 Cr. as ordered by the Hon’ble Court on 26.03.2014.

Therefore, the figure of 4 weeks as reported in the article is incorrect since Mr. Sibal sought 8 weeks’ time and not 4 weeks. Same is clarified to that extent.

4.      The news represented that an ultimatum was given whereas the order passed by the Hon’ble Court makes it clear that the Hon’ble Court accepted the request of not appointing a Receiver since Mr. Sibal stated that a serious attempt has been made for finalizing a deal of which the documents will be provided to the Amicus Curiae and the Counsel for SEBI. This acceptance of the request was also noted in the order dated 13.03.2015. As a matter of fact, Mr. Sibal stated that the situation of appointment of a Receiver may not arise if an opportunity is given. There is nothing mentioned in the order passed on 13.03.2015 about any ultimatum and therefore same amounts to incorrect reporting and same is clarified to that extent.

5.      The Hon’ble Court extended the facility of communication up to 5 hours a day to Mr. Roy and two directors of Sahara’s two companies, inside the jail premises which was not reported in the article. Further, jail authorities were also directed to facilitate Mr. Roy and two directors with two laptops for functioning which was also not reported in the article.

6.      During the hearing, SEBI was directed to file an affidavit clarifying its stand when a letter was indicated to the Hon’ble Court by Mr. Sibal that a communication was issued to HDFC Bank by SEBI on 19.12.2013 that the order dated 21.11.2013 only applies to specific movable and immovable properties in a particular application, therefore, RBI has no cause of action to state that there was a violation by Sahara India Financial Corporation Limited of the order passed by the Hon’ble Supreme Court on 21.11.2013 and 04.06.2014.

7.      Further, Mr. Sibal fairly stated during hearing that about Rs. 12,000 Cr. stands deposited with SEBI as on date out of which barely anything was disbursed by SEBI. The Hon’ble Court also made it clear that it will be open to argue on that issue at a later stage. However, the article in the front page of the newspaper reported that only Rs. 5,120 Cr. was deposited whereas nearly Rs. 12,000 Cr. stands deposited with SEBI as on date. Same is clarified to that extent.

Sahara employees face salary delays on liquidity crunch

NEW DELHI, FEB 27:  

Sahara’s long-drawn dispute with regulator Sebi over investor repayments has begun to take its toll on salaries of the group’s employees, which are getting delayed amid a major liquidity crunch.

The salary delays are mainly being faced by the staff members in the corporate offices of the crisis-hit group, while there are also delays on certain statutory payments and operating obligations or expenses related to day-to-day business due to difficulty in fund flows.

When contacted, a Sahara spokesperson confirmed the delays in salary and other payments, while adding that the junior staff members are being given priority for the payments.

“We are working to diffuse this crisis, which has also created grave difficulties for our employees. Sahara India is one big Pariwar (family) and all the employees are its members, who are standing together in these difficult times.

“With our dedicated employees and the strong fundamentals of the group, we are hopeful that we will soon come out of this crisis,” the spokesperson told PTI.

The group has over 10 lakh full-time and part-time employees, including permanent staff at its various companies, permanent agents who get regular incentive payments besides a large number of part-time agents.

While the exact number of persons whose salaries and other payments have been delayed could not be ascertained, sources said their numbers could run into “tens of thousands”.

“The group is facing a liquidity crunch for past one year due to embargo and double payment (for investor refund), resulting into many problems like meeting the salary, statutory and other operating obligations/expenses in doing business,” the spokesperson said.

“We are however releasing the salaries time to time based on the fund flow on a continuous basis. The delayed salaries of junior staff were released just a few days back as extra care has been taken for our junior staff. Soon salaries of other brackets will be released,” he added.

“In some business divisions, salaries of our employees have got delayed by many months. However, situation is better at those divisions which have their own fund-flow like the Group’s luxury hotel Sahara Star in Mumbai, resort town Aamby Valley City and the 500-bed tertiary care Sahara Hospital in Lucknow.

Replying to queries on salary delays, the group spokesperson said that “for the past 14 months, Sahara India group’s all kinds of assets and bank accounts are under embargo of Supreme Court and there is an extra burden of demand of double payment against single liability in Sahara-Sebi case”.

Sahara is trying to raise necessary funds to secure release of its chief Subrata Roy, and two other officials, from Tihar Jail where they have been lodged for almost a year in connection with the investor repayment case.

The group was asked by the Supreme Court in August 2011 to deposit over Rs. 24,000 crore with Sebi for refund to investors. Sahara, which has deposited some instalments since then with Sebi, maintains that it has already refunded over 95 per cent of investors directly.

The spokesperson further said that “any fund raised by the group, which we are doing, through sales and mortgaging of properties, that money shall go to Sahara-Sebi account and nothing will come to the corporate“.

“The money deposited in Sahara-Sebi account is a double payment, which we are making.”

The spokesperson also said that “Sahara’s two Companies in question collected Rs. 25,780 crore through OFCD (Optionally Fully Convertible Debenture) schemes. Of this, Sahara repaid almost 95 per cent (around Rs. 23,000 crore) of OFCD liabilities of these two companies by 2012.

“In addition to this, Sahara till date has already deposited more than Rs. 11,000 crore (including interest) with Sebi and by the time our Chairman (Subrata Roy) comes out of custody, we shall be having aroundRs. 18,000 crore with Sebi.

“... as per the order of Supreme Court, the entire money with bank interest shall come back to Sahara after verification. But for the same, Sebi has to initiate verification of our investors and the repayments which we have made and return the money to us.”

The recent attempts by Sahara to raise funds through a US-based entity Mirach Capital failed, while the group has said it is now in talks with an European bank and a Dutch pension fund, among others, to explore garnering funds to ensure release of Roy and two others from jail.

The Supreme Court recently posted the matter for further hearing on March 13, while asking Sebi and other parties to respond to Roy’s plea for extension of facilities inside the prison by at least two working weeks to explore negotiations with these prospective parties.

Sebi lowers Sahara case expense estimates to Rs 25.88 cr

As a prolonged Sebi-Sahara battle continues, the regulator has revised lower the expenditure it

intends to recover from the business group to Rs 25.88 crore in the current fiscal towards money spent on identifying the investors and making refunds.

   As per the court orders, Saharas were asked to bear the costs incurred by Sebi in identifying the investors and repayment of refunds to them, which has been an uphill task for the capital markets watchdog.

     In its mid-term review of budget estimates for the current financial year 2014-15, Sebi is believed to have pegged the revised estimate of 'expenses recoverable from Sahara' at Rs 25.88 crore, down from the original budget estimate of Rs 37.66 crore. The actual expenditure already made till December 31, 2014, in this financial year stood at Rs 8.75 crore.

     This downward revision has taken place largely due to a planned expenditure being revised from Rs 12 crore to Rs 4 crore for the current fiscal because of non-operationalisation of a contract given to UTI-ITSL in the Sahara case.

     Besides, the advertisement charges have been revised lower from Rs 3 crore to Rs 1.46 crore.

     The amount earmarked for in-person verification charges has also been reduced, as the same could not be spent amid subsequent developments in the courts and henceforth a total amount of Rs 1 crore has been set aside for this particular purpose.

     In this high-profile case involving refund of over Rs 24,000 crore and additional interest of 15 per cent per annum, the Supreme Court had asked Sahara in August 2012 to submit all documents and refund money to SEBI for further repayments to genuine investors after verifying the documents.

     Sahara had submitted 5.28 crore documents to Sebi, which set up a Special Enforcement Cell for the case. Sebi had awarded a contract to Stock Holding Corporation of India Ltd (SHCIL) for storage, digitisation, scanning etc, and to UTI Infrastructure & Technology Services Ltd (UTI-ITSL) for refund related activities. These two contracts were originally worth

about Rs 55 crore.

     In addition to these contracts, SEBI has incurred significant expenses under other heads also with regard to the Sahara case, including towards legal costs and the in-house refund handling expenses.

     Through one of its recent advertisements, Sebi had invited refund applications till January 31 from the eligible Sahara investors along with necessary documentary proof. Earlier, Sebi had invited refund claims to the regulator by September 30, 2014.

Sebi makes fresh bid to find Sahara Investors

Sebi had received 4,900 refund claims during the August-September exercise from the bondholders of two Sahara companies --Sahara India Real Estate Corp Ltd (SIRECL) and

Sahara HousingInvestment Corp Ltd (SHICL), which had raised over Rs 24,000crore from about three crore investors.

While Sahara maintains it has already repaid more than 93per cent of the outstanding dues directly to the concerned bondholders and the remaining amount was just about Rs 2,500 crore, it deposited Rs 5,120 crore to Sebi in December 2012towards the investor refunds as per Supreme Court orders. Further money has been deposited by the group with Sebi subsequently and it is currently in the process of raisingmore funds to ensure release of its chief Subrata Roy from the jail.

Sebi began the refund process in May 2013, while asking eligible investors to submit their claims. However, the refunds made so far remain minuscule, although the regulator

has not so far made public the quantum of all such payments. Sahara has been maintaining that Sebi should verify the refunds made by it directly and claims to have submitted to

the regulator proof for nearly 75 per cent of refunds. It also says that the remaining 25 per cent refund proof is lying in its Mumbai godown to be given to Sebi.

Sahara also contends that bulk of its investors didn't have bank accounts and other formal financial papers, the details of which have been sought by Sebi. On the identification on Sahara's investors, Sebi has contested in the court that addresses of many investors given

by Saharas were incomplete as only village name, district and state is given without any house number or street/lane names.

On its part, Sahara has maintained that most investors are from rural India and had no house numbers or street names. In the new refund application form, Sebi had given a new

address format for rural investors, asking only village name, post office, district and state as against additional details like house number and street name for urban addresses.

In its latest annual report for the year ended March 31, 2014, Sebi had disclosed having received 3,612 refund applications involving 13,948 deposit accounts till that time in the Sahara matter.

Of those applications, Sebi made refunds in case of 445 applications involving an equal number of deposit accounts for an aggregate amount of about Rs 1.25 crore including interest

of about Rs 43.83 lakh. The other applications had deficiencies or fell under either 'mismatch' or 'multiple investment' category. "Out of the remaining 3,167 applications, in respect of

424 applications involving 1,683 deposit accounts, certain deficiencies were observed in the applications/supporting documents submitted by the applicants which were brought to

the notices of the applicants for their clarification/rectification, and replies are awaited from

them," Sebi said. Sebi also could not process 1,260 applications involving 7,159 deposit accounts as these were in multiple investment category, while 92 cases involving 92 accounts did not meet

the extant refund methodology adopted by the regulator. Besides, 1,776 applications involving 4,395 accounts could not be processed because of being 'mismatch category'.

SEBI versus Sahara: Rs. 22 crores versus Rs. 18000 crores

Today, Sebi has around Rs.11,500 crores of Sahara's money, including bank interest.

By the time our Chairman shall come out, that is, when full bail amount is paid, our money lying with SEBI will be Rs.18,000 crores cash.  Since no bank is ready to give Bank Guarantee to us without 100% cash margin, it is going to be Rs.18,000 crores of cash with Sebi.

While in the last 26 months,Sebi had to pay only around Rs.2 crores.

More importantly, Sebi came out with an All-India Media Advertisement, twice, inviting investors for repayments. But till now, they have received from all over India, a demand of Rs.20 crores only.

A question can now arise that whether the investors exist or do not exist; meaning, are these all fictitious accounts?

Only verification can clarify this point, as mandated in Hon'ble Court's order of 2012. Since then, in almost past 26 months, Sebi has not started verification; the reason best known to them. 

About fictitious account, we would like to mention here another issue pertaining to the Reserve Bank of India (RBI) which is as follows:

Between 2008 and 2012, on RBI's order, Sahara paid back Rs.18,000 crores under the command of RBI's two Statutory Auditors and 3 RBI nominated Directors.  The bank account of that amount was controlled by the RBI.  A strict rule was followed that when RBI auditors finally checked the identity of all investors (KYC), only then the next months' payments were allowed by the RBI and during the process, in 4 years, RBI did not find any fictitious account; not even one.

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Regards,

Corporate Communications,

Sahara India Pariwar

Parrikar 'disturbed' at Subrata Roy's long incarceration