The Supreme Court has once again admonished the Sahara Pariwar, as the group likes to be called, for its endless machinations aimed at flouting its orders. Seeking to send a clear message to the Pariwar, the court said it was not “helpless” in taking further action and might ask the CBI and the Registrar of Companies to probe the sources of funds. An earlier order barring the promoter Subroto Roy and a few of his associates from leaving the country will remain. The specific issue now has been Sahara’s continued stonewalling of the court’s order to disclose the source of the nearly Rs. 23,000 crore with which it had claimed to have made refunds to a very large number of investors in its controversial optionally fully convertible debentures (OFCD). In 2011, the capital market regulator, SEBI, ruled the debenture illegal, after which the group launched a spate of legal proceedings at different forums, basically challenging the capital market regulator’s jurisdiction. Repeated rebuffs, at the Allahabad High Court and the Securities Appellate Tribunal, did not detract Sahara from the legal battles. A landmark Supreme Court judgment of August 31, 2012, comprehensively upheld SEBI’s stand and directed Sahara to furnish information on the OFCDs and repay depositors within strict timelines but it has found ways to dodge the order. In November, the Supreme Court, while dealing with yet another default, chastised the group “for making a mockery of our order” and for “playing hide and seek” with the highest judiciary. Those words were strong enough to shame anybody, but Sahara remains unfazed.

Having failed in its attempts to shop around for a favourable regulatory jurisdiction for its OFCDs — the Ministry of Corporate Affairs is seen to be more lenient than SEBI — Sahara is facing a more basic problem of preserving its extremely opaque functioning. The controversial debenture issue is to be seen as another attempt to conceal the true ownership of large sums of money. It is also another instance of its frequent brush with financial sector regulators. SEBI, which has pursued the case doggedly, should continue to be firm and withstand political pressures. Politicians, particularly in the Opposition, who are quick to seize issues such as this, have been strangely silent on the Sahara issue. The Finance Ministry has remained silent. As for the Supreme Court, neither its strong language nor indeed its repeated warnings are likely to faze the Pariwar. As a consequence, the credibility of the entire financial regulatory system, and indeed the rule of law itself, stands diminished.

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