The Sahara Group, or Pariwar, as it likes to be called, is no stranger to skirmishes with financial sector regulators. The most recent case involves a massive mobilisation of over Rs.24,000 crore allegedly from lakhs of investors through an unauthorised issue of optionally fully-convertible debentures (OFCD) via two group companies. When the Securities and Exchange Board of India (SEBI) held the OFCD issue illegal some 14 months back and asked the Pariwar to return the money, the latter went to court questioning the capital market regulator’s jurisdiction. Successive failures did not deter Sahara from appealing to the Supreme Court. On August 31, a two-member bench upheld the SEBI order and set stiff timelines for returning the money and supplying information on those who had bought the debentures. However, on December 5, a three-member bench of the Supreme Court headed by the Chief Justice gave unexpected relief to Sahara when the company asked for more time to pay back its depositors. Even though the new bench retained the deadline that had been set earlier for the furnishing of depositor information, it gave the Pariwar time till February 2014 to make repayments in instalments.

This apparent softening of stance at the highest levels of the judiciary is just one of those inexplicable happenings that has given Sahara an air of invincibility in relation to financial sector regulators and allowed it to retain its opaque ways. The Pariwar’s connections across the political spectrum are frequently talked about. Its head, Subroto Roy, is close to the Samajwadi Party but also turned up at Narendra Modi’s swearing-in ceremony as Chief Minister of Gujarat on Wednesday. In the latest case, neither the Finance Minister nor any political leader of stature has commented on the enormous sums raised by the company through illegal channels without so much as lip service to KYC (know your customer) norms. Not surprisingly, the Pariwar continues to defy authority. Days after the Supreme Court order, it claimed its actual liability is only a fraction of what was estimated by SEBI. Market reports speak of group representatives ‘encouraging’ debenture holders to shift their investments to other businesses promoted by Sahara. That way it can claim repayment while getting to keep the money and shifting it to a less onerous regulatory jurisdiction. Among the important lessons to be learnt by regulators from this episode is that any loophole that allows a group like Sahara to shop around for a favourable regulator needs to be plugged. Secondly, regulators like the RBI and SEBI need to exchange information with one another. With all that, it will still require a lot of political will to check the Sahara Pariwar and its imitators.

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