Topic of the week for discussion: 6th to 12 th March 201 4 Topic: Clash of the Titans: The Regulator Vs The Pariwar Sahara India Pariwar is an conglomerate headquartered in Lucknow, India with business interests in finance, infrastructure & housing, media & entertainment, consumer merchandise retail venture, manufacturing and information technology. The company has a market capitalisation of US$25.94 billion as of March 2011. The group is a major promoter of sports in India and was the main sponsor of the Indian cricket Team. The company owns a 42.5% stake in Formula One's Force India Formula 1 Team and also sponsors India national field hockey team . On 26 Feb, 2014, the Supreme Court of India issued a non-bailable warrant to arrest the Sahara India Pariwar founder, Subroto Roy since he failed to appear in front of the court despite a formal summon On 28 Feb 2014, Uttar Pradesh Police arrested Roy after his plea for recall of the warrant was declined by the court. Hours before Sahara chief Subrata Roy Sahara surrendered to the Lucknow police on Friday, Sahara India reiterated its stand that the company has paid all the liabilities, except around Rs 2,000 crore. The company had maintained this stance in various Supreme Court hearings. It also claimed inaction from Securities and Exchange Board of India (Sebi), which according to the company, did not perform any verification in the last 16 months. The Controversy It all started with Sahara Prime City, a real estate venture of the group, filing a Draft Red Herring Prospectus (DRHP) with Sebi on September 30, 2009. This Topic is an initial document that a company needs to file with Sebi to bring out an Introduction IPO or initial public offer of shares to public investors. While going through this DRHP, Sebi sensed certain large-scale fund raising exercises by two Sahara firms — Sahara India Real Estate Corp Ltd (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL). Soon, Sebi received two complaints — one on December 25, 2009 and the second on January 4, 2010 — alleging illegal means used by these two firms in issuance of certain bonds, called OFCDs (Optionally Fully Convertible Debentures), to the public throughout the country for many months. Further investigations found that the funds were raised through OFCDs after filing RHPs (Red Herring Prospectus) with the Registrar of Companies, although the rules required permission from Sebi for any issuance of securities to 50 or more investors. In these cases, the number of investors ran into crores. Eventually, Sebi passed an interim order against the two companies on November 24, 2010, asking them to refund the money collected from investors. A final order was passed by the regulator on June 23, 2011, while the group challenged these directions before the Securities Appellate Tribunal. However, the Tribunal upheld the Sebi orders on October 18, 2011, and asked the companies to refund Rs 25,781 crore to over three crore investors. The group then moved the Supreme Court, which also passed a historic order on August 31, 2012, asking the two companies to deposit outstanding amount of over Rs 24,000 crore with Sebi for refund to the investors. Saharas were also asked to deposit details of all investors to Sebi, which was mandated to refund the money after verifying their genuineness. Sebi again moved the Supreme Court alleging non- compliance by the group to the earlier orders, pursuant to which the apex court passed another order on December 5, 2012, and asked the two firms to deposit the money in three instalments beginning with an immediate payment of Rs 5,120 crore. While the group paid the first instalment, it failed to meet the deadline for other two payments and rather claimed to have already paid more than Rs 20,000 crore directly to the investors. Unconvinced with Saharas' claims, Sebi passed orders on February 13, 2013, to attach bank accounts and other properties of the group and later issued summons for personal appearance of Subrata Roy and other three directors before it. Roy and others appeared before Sebi on April 10, 2013, after which he famously told reporters that he was not even offered tea by Sebi officials. During the same month, April 2013, Sebi finally closed its file on Sahara Prime City, whose planned IPO had kick-started this long-running battle. In the meantime, Sahara group continued to issue full-page and multi-page advertisements in newspapers wherein it claimed to have cleared bulk of its outstanding liabilities to bondholders. In these advertisements, the group also claimed to have raised total funds to the tune of Rs 2,25,000 crore since inception in 1978 across various businesses and pegged its total networth at an astonishing figure of Rs 68,174 crore and the size of its assets at Rs 152,518 crore. Sahara also charged that Sebi was making " baseless allegations" against it and accused it of not accepting "60 truckloads of documents", while the regulator countered these charges by saying that the documents given by them were "hopelessly mixed up ". Sebi also issued public notices in newspapers, cautioning investors and general public against dealing with Saharas. The regulator also asked various financial institutions including banks to freeze all accounts of the group, besides writing to district collectors and other authorities for attachment of land, real estate and other properties. Similar letters were sent also to the tax department and other agencies like Enforcement Directorate too.Later, Sebi began an exercise for refund to genuine investors from Rs 5,120 crore deposited by Saharas. However, not much headway appears to have been made in the process as Sebi has detected instances of multiple accounts, on which it has sought clarity from the Supreme Court. Questions are being raised on why Subrata Roy was being given such special treatment as this was yet another instance of the Uttar Pradesh Police dishing out special treatment to VIPs. The CJM court had said the UP police must produce Subrata Roy in the Supreme Court, but till then it is their prerogative to house him where ever they want. The UP police decided on one of the best guest houses in Lucknow .Meanwhile, friends, especially those from the film industry, extended their support to Roy. During a special press conference, they conveyed their personal opinion on the Sahara chief."I have never heard anyone say anything bad about Subrata. But in such cases, people are scared to come forward and give their opinion," said lyricist Sameer. "Today when someone lands in trouble, people part ways with that person, but we have come together for Sahara shree. He is an honest person and should get a chance to defend himself," said actor Fardeen Khan. Even the likes of Kapil Dev and Sridevi have spoken out in favour of Sahara. Read further: http://economictimes.indiatimes.com/articleshow/31195467.cms?utm_source=contentofinteres t&utm_medium=text&utm_campaign=cppst http://www.dnaindia.com/india/report-sebi-not-going-though-truck-loads-sahara-documents- says-sahara-group-1965898 http://ibnlive.in.com/news/subrata-roy-sahara-brought-to-delhi-to-be-produced-in-sc- today/455678-3-244.html .