Case Study

Sahara India Real Estate Corporation Ltd (SIRECL) and others

Versus
Securities and Exchange Board of India (SEBI) and another
{SCC 272; 2012}
For the purposes of Internal Assessment of the paper:

“Investment Law’
In partial fulfillment of the course:

LL.B (Hons)
Prepared under the guidance of and submitted to:

Mr. Himanshu Varshney

By

Aditya Jain
Having Enrollment, No:

A032170123211

FEBRUARY 15, 2025

aMITY lAW sCHOOL
Amity University, Sector-125, Noida, Gautam Buddha Nagar, Uttar Pradesh -201301
The case is primarily based on the decision of the Supreme Court of India in “Sahara
India Real Estate Corporation Limited (SIRECL) and others v Securities and Exchange
Board of India (SEBI) and Another;” Supreme Court of India; August 31, 2012; Bench:
K. S. Radhakrishnan and Jagdish Singh Khehar, JJ.; Reported in 2012 Indlaw SC 272;
2012 (3) CLT(SC) 216; [2012] 174 Comp Cas 154; JT 2012 (8) SC 385; 2012(8)
SCALE 101, and developments thereafter as reported in the media.

1. THE PARTIES

A. Sahara India Pariwar (Sahara)

Sahara was a privately held company headquartered in Lucknow and

founded in 1978. In March 2014, according to information available at its
website:

“GROUP'S NET WORTH: (Balance Sheet Net Owned Fund)

22,926 Crores PLUS 45,248 Crores; Net increase in Net Worth
post recording of assets at Fair Market Value of one group
company pursuant to the de-merger order of Hon'ble High Court
of Mumbai. SO TOTAL NET WORTH OF GROUP IS 68,174 Crores
LAND BANK: 36,631 ACRES
WORK FORCE: Over 11 Lakh Salaried and Field workers are
earning bread and butter for their families
ESTABLISHMENTS: Total Establishments – 4799
GROUP ASSETS: Market Value/ NPV of Potential Earning -
152,518 crores, Potential Earning - 317,853 crores”1

B.Subrata Roy (Roy)

Sahara was headed by Subrata Roy, who preferred to call himself

"Saharasri" Subrata Roy Sahara, Managing Worker & Chairman, Sahara

India Pariwar.2
(Subrata Roy, as described by the British Broadcasting Company (BBC)

When Roy was arrested in February 2014, the BBC reported as follows:

“One of India's most flamboyant tycoons, Subrata Roy, has

been taken into police custody after surrendering himself for
arrest in a fraud case…

Who is Subrata Roy?

 Chairman of Sahara, an $11bn business group
 Business empire spans finance, housing, manufacturing, aviation, and
media
 Owns New York's Plaza Hotel and London's Grosvenor House

 Employs 1.1 million workers, India's biggest private employer

 Sponsors India hockey team, owns a stake in F1 racing team Force India
 Owns a fleet of private jets, helicopters, Rolls-Royces, Bentleys and
BMWs”3
1http://www.sahara.in/quickfacts.html; last accessed on March 31, 2014.
2 “My biggest achievement in life,” Subrata Roy. http://www.sahara.in/leadership.html; last
accessed on March 31, 2014.
2 of 23

C. Securities and Exchange Board of India

The financial regulator in India, SEBI was equivalent to Securities and

Exchange Commission (SEC) in the United States. Its website provides this
introductory information:

“The Securities and Exchange Board of India (SEBI) was enacted

on April 12, 1992 in accordance with the provisions of the
Securities and Exchange Board of India Act, 1992. The Preamble
of the Securities and Exchange Board of India describes the
basic functions of the Securities and Exchange Board of India
as"...to protect the interests of investors in securities and to
promote the development of, and to regulate the securities
market and for matters connected therewith or incidental
thereto"”4

2. THE SUPREME COURT JUDGMENT IN BRIEF

While hearing the matter, the Supreme Court (SC) was seriously concerned
about issues of money laundering and fictitious investors. The case had
reached the SC in a very complex manner with number of petitions filed in
High Courts, SEBI, Securities Appellate Tribunal (SAT), and every other
possible forum. The introductory paragraph of the judgment is as follows:

“1. We are, in these appeals, primarily concerned with the

powers of the Securities and Exchange Board of India (for short
'SEBI') under Section 55A(b) of the Companies Act, 1956 to
administer various provisions relating to issue and transfer of
securities to the public by listed companies or companies which
intend to get their securities listed on any recognized stock
exchange in India and also the question whether Optionally
Fully Convertible Debentures (for short 'OFCDs') offered by the
appellants should have been listed on any recognized stock
exchange in India… and whether they had violated the
Securities and Exchange Board of India (Disclosure and
Investor Protection) Guidelines, 2000…and various regulations
of the Securities and Exchange Board of India (Issue of Capital
and Disclosure Requirements) Regulations, 2009…and also
whether OFCDs issued are securities under the Securities
Contracts (Regulation) Act, 1956…”5

Appeal by Sahara

Being aggrieved by the order of SEBI and SAT for refunding money to
investors, from whom Sahara had collected money without any legal
authority, Sahara’s companies had filed appeals in the SC. The SC decided
the two appeals by a common judgment as mentioned:

“2. Sahara India Real Estate Corporation Limited (for short

'SIRECL') and Sahara Housing Investment Corporation Limited
(for short 'SHICL"), appellants herein
3 of 23

3 “Subrata Roy: India detains Sahara group chief,” BBC, February 28, 2014.
http://www.bbc.com/news/world- asia-india-26379739; last accessed on March 31, 2014.
4 “About SEBI: Establishment and Preamble.”

http://www.sebi.gov.in/sebiweb/stpages/about_sebi.jsp; last accessed on March 31, 2014.

5 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 1.
4 of 23

(conveniently called Saharas), are the companies controlled by

Sahara Group. Saharas have raised almost identical issues on
facts as well as on questions of law before us and hence we are
disposing off both the appeals by way of a common judgment.” 6

Funds Raised through Unsecured OFCDs

The two Sahara companies had collected huge sums of money – almost
Rs.20,000 crores – by OFCDs. The details were provided in the judgment:

“4. SIRECL, in its Extraordinary General Meeting held on

3.3.2008, resolved through a special resolution passed in terms
of S. 81(1A) of the Companies Act to raise funds through
unsecured OFCDs by way of private placement to friends,
associates, group companies, workers/employees and other
individuals associated/affiliated or connected in any manner
with Sahara Group of Companies (for short 'Sahara Group')
without giving any advertisement to general public… 8. SHICL, a
member of Sahara Group companies, also convened an Annual
General Meeting on 16.9.2009 to raise funds by issue of OFCDs,
by way of private placement, to friends, associated group
companies, workers/employees and other individuals
associated/affiliated or connected in any manner with the
Sahara Group companies… the details of which were mentioned
in the Red Herring Prospectus (for short 'RHP')… filed with the
Registrar of Companies (for short "RoC"), Uttar Pradesh on
13.3.2008…”7

Total Collection by SIRCEL

The sums of money were collected from a very large number of investors;
more than 2 crores. On an average, it will amount to about Rs. 8,000 – Rs.
10,000 per investor. The SC noted in the judgment:

“7. SIRCEL, therefore, floated the issue of the OFCDs as an open

ended scheme and collected an amount of Rs.19400,86,64,200
(Nineteen thousand four hundred crores, eighty six lacs, sixty
four thousand and two hundred only) from 25.4.2008 to
13.4.2011. Company had a total collection of
Rs.17656,53,22,500 (Seventeen thousand six hundred and fifty
six crores, fifty three lacs, twenty two thousand and five
hundred only) as on 31.8.2011, after meeting the demand for
premature redemption. The above mentioned amounts were
collected from 2,21,07,271 investors.”8

SEBI issued Notice

The financial regulator SEBI had received complaints about the collection
drive by two Sahara companies and it had written letters and thereafter
issued a notice as mentioned:

“14. SEBI, in the meanwhile, issued a notice dated 24.11.2010

informing both SIRECL and SHICL that the issuance of OFCDs
5 of 23

was a public issue and, therefore, securities were liable to be

listed on a recognized stock exchange u/s. 73 of the Companies
Act. From the preliminary analysis, it was pointed out that the
issuance of OFCDs by Saharas was prima facie in violation of
… Both the companies were,

6 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 2.

7 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraphs 4 and 8.
8 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 7.
6 of 23

therefore, directed to show cause why action should not be

initiated against them including issuance of direction to refund
the money solicited and mobilized through the prospectus
issued with respect to the OFCDs…”9

SEBI’s Extensive Powers: Listed and Unlisted Public Companies

The SC held that the powers of SEBI were not limited and both listed and
unlisted public companies were under its purview:

“106. The importance and relevance of s. 11 and 11A of the

SEBI Act in the foregoing paras, has been highlighted above. Of
equal importance are sections 11B and 11C of the SEBI Act…
Neither of the aforesaid provisions need a detailed analysis. A
bare perusal of the aforesaid provisions brings to the fore, the
extensive powers vested with the SEBI to issue directions and to
make investigations. The power vested with SEBI, is not limited
in any manner, and shall therefore, be deemed to extend to
both "listed" and "unlisted" public companies.” 10

The SC further observed that the powers of SEBI were not fettered and
amendment in the Companies Act vindicated this stand. It was fully powered
to regulate the securities market. The SC made the following observation:

“107. From a collective perusal of sections 11, 11A, 11B and

11C of the SEBI Act, the conclusions drawn by the SAT, that on
the subject of regulating the securities market and protecting
interest of investors in securities, the SEBI Act is a stand alone
enactment, and the SEBI's powers thereunder are not fettered
by any other law including the Companies Act, is fully justified.
In fact the aforesaid justification was rendered absolute, by the
addition of section 55A in the Companies Act, whereby,
administrative authority on the subjects relating to "issue and
transfer of securities and non payment of dividend" which was
earlier vested in the Central Government (Tribunal or Registrar
of Companies), came to be exclusively transferred to the
SEBI.”11

SEBI’s Jurisdiction vis-à-vis SIRECL and SHICL

Thus, it became simple to answer the question that the two Sahara
companies were clearly under SEBI’s jurisdiction. The SC held:

“108. In answering the question posed above, there seems no

ambiguity that the SEBI has the jurisdiction to regulate and
administer SIRECL and SHICL.”12

Issue at SEBI’s behest

As the appeals were filed by Sahara companies, all the questions were
framed at their behest. But, there was one issue, which the SC handled at
SEBI’s behest. And, it related to the well-thought out and pre-planned
attempt by Sahara companies to circumvent SEBI.
7 of 23

The SC discussed this issue in great detail and analysed it from three
perspectives:

9 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 14.
10 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 106.
11 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 107.
12 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 108.
8 of 23

“Whether it was a pre-planned attempt of SIRECL and SHICL, to

bypass the regulatory (and administrative) authority of SEBI in
respect of OFCDs/ bonds issued by them? 109. …The instant
issue is being dealt with at the behest of SEBI. During the
course of hearing it was the vehement contention on behalf of
the learned counsel representing SEBI, that SIRECL and SHICL
had pre-planned to avoid the involvement of SEBI in the
activities of the two companies. This, according to the learned
counsel representing SEBI, was with the sole purpose of having
a free hand in their endeavours. The instances pointed out by
the learned counsel for the SEBI can safely be discussed under
three heads which are being dealt with hereinafter.” 13

The first perspective:

“110. The first contention advanced by the learned counsel

representing SEBI, was based on s. 56 of the Companies Act….
There is, therefore, merit in the contention advanced by the
learned counsel representing SEBI. Even though it is not
possible for one to record a clear finding, whether or not the
declaration under reference was altered with a pre-planned
intention to bypass the regulatory and administrative authority
of SEBI, there can be no hesitation to recording, that it certainly
seems so.”14

The second perspective:

“112. Learned counsel representing the SEBI invited our/my

attention to an allegedly arbitrary procedure adopted by the
appellant-companies…The procedure adopted by the appellant-
companies is obviously topsy-turvy and contrary to the
recognized norms in company affairs. All this makes the entire
approach of the appellant- companies calculated and crafty. It is
clearly apparent, that the appellant-companies had clearly
taken upon themselves to tread a path different from the
mandate of law delineated under the Companies Act. There can,
therefore, be no doubt about the inferences drawn by the
learned counsel representing the SEBI even in so far as the
second perspective is concerned.”15

The third perspective:

“114. Learned counsel representing SEBI also invited our

attention to the attempt at the hands of the appellant-
companies in withholding information from the SEBI… This itself
is sufficient to conclude, that the whole affair was doubtful,
dubious and questionable. The consequence thereof, if correct,
would be shocking.”16

SC’s Concern

The SC was seriously concerned at the blatant manner in which Sahara

9 of 23

companies had tried to make use of all the loopholes possible in the legal
provisions to achieve what could never be done in a straightforward and
legal manner.

The Court openly voiced its concerns:

13 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 109.
14 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraphs 110 and 111.
15 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraphs 112 and 113.
16 SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 114.
10 of
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“115. There can therefore be no hesitation in accepting, that on

all three perspectives raised at the behest of the SEBI, to
demonstrate that there was a pre-planned attempt at the hands
of the SIRECL and SHICL, to bypass the regulatory and
administrative authority of the SEBI, does seem to be real. One
can only hope, it is not so. But having so concluded, it is
essential to express, that there may be no real subscribers for
the OFCDs issued by the SIRECL or SHICL. Or alternatively,
there may be an intermix of real and fictitious subscribers. The
issue that would emerge in the aforesaid situation (which one
can only hope is untrue) would be, how the subscription amount
collected, should be dealt with, specially when the impugned
orders passed by the SEBI, SAT are to be affirmed. Even though
I hope that all the subscribers are genuine, and so also, the
subscription amount, it would be necessary to modify the
operative part of the order issued by the SEBI which came to be
endorsed by the SAT, so that the purpose of law is not only
satisfied but is also enforced.”17

SC’s Order

Finally, the SC modified the SEBI and SAT order a little bit, but in spirit the
orders remained as they were. Sahara companies were ordered to refund the
amounts collected to SEBI with interest, which in turn would refund it to the
investors. Failing the compliance of this order, SEBI was directed to take
recourse to all legal remedies.

The SC ordered:

“1. Saharas (SIRECL & SHICL) would refund the amounts

collected through RHPs dated 13.3.2008 and 16.10.2009 along
with interest @ 15% per annum to SEBI from the date of receipt
of the subscription amount till the date of repayment, within a
period of three months from today, which shall be deposited in
a Nationalized Bank bearing maximum rate of interest…10. We
also make it clear that if Saharas fail to comply with these
directions and do not effect refund of money as directed, SEBI
can take recourse to all legal remedies, including attachment
and sale of properties, freezing of bank accounts etc. for
realizations of the amounts…”18

3. DEVELOPMENTS POST AUGUST 2012 JUDGMENT

Sahara did not take the judgment of SC with due seriousness and kept on
delaying its execution on one or the other pretext. SEBI, SAT, and SC were
quite displeased with the manner in which things were handled. Even after
six months of the SC’s order of August 31, 2012, there was confusion galore.

Confusion Galore in March 2013

Sahara had filed so many petitions in so many forums that within six months
of the SC’s order to refund money to the tune of Rs.24,000 crore, the
adjudicating bodies were trying their best to see a clear path in so much
11 of
23
confusion. The situation had become quite difficult for Sahara.

In March 2013, The Times of India reported:

17SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, paragraph 115.
18SC judgment of August 31, 2012 as reported in 2012 Indlaw SC 272, Order at the end of the
judgment giving 11 points.
12 of
23

“In a double blow to Sahara, Sebi on Tuesday summoned group

chief Subrata Roy on April 10 to finalise list of assets to be sold
for Rs 24,000 crore refund to investors, while the Himachal
Pradesh high court restrained five Sahara entities from raising
money from the public. Roy and three other top executives of
the group have been asked to appear personally before the
market regulator, after submitting details of their assets, bank
accounts and tax returns by April 8, Sebi said in an eight-page
order. Sebi also made it clear that it would go ahead with
finalising the terms of the proclamation of asset sale ex parte, if
Subrata Roy, Ashok Roy Choudhary, Ravi Shankar Dubey and
Vandana Bhargava fail to appear on April 10.

… Besides the four individuals, Sebi also sought details of

assets, bank accounts and other financial information of these
two firms, so that it can proceed with the attachment orders
involving sale of their assets to recover money for refund. …
The four persons have been further directed to submit "a list of
all their assets and details thereof (including properties, monies,
bank accounts etc) enumerated in the attachment orders,
situated in India or outside India, including any charge,
encumbrance created over them." … Sebi also asked them to
produce all original title deeds of their assets and details of
bank accounts in India or abroad, along with their income tax
returns and wealth tax returns for the financial year 2007-08
onwards.

… At their personal hearing on April 10, the four would also

need to ascertain details of assets and investments of SIRECL
and SHICL. The firms have also been asked to submit a list of all
their holding firms, subsidiaries, associates, partnerships,
special purpose vehicles, cooperative societies etc, forming
Sahara group, along with details of their addresses, directors,
partners, shareholdings, cross-holdings and partnership
shares…

Meanwhile, the HP high court in Shimla on Tuesday restrained

five entities — namely Sahara India Parivar, Subrata Roy
Sahara, Sahara Credit Cooperative Society Ltd, Sahara Q Shop
Unique Product Range Ltd and Sahara Q Gold Mart Ltd — from
raising money from the public through any of their schemes.” 19

Mood in the Country

While Sahara case was trudging along, the mood in the country was swinging
against flamboyant businesspersons who didn’t care for their companies and
employees. Kingfisher Airlines was targeted.

Senior columnist S. A. Aiyar wrote in The Times of India:

“Vijay Mallya has not paid employees of Kingfisher Airlines for

months, and has defaulted on thousands of crores due to
13 of
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suppliers and creditors. Yet he has just donated three kilos of
gold, worth almost one crore, to the Tirupathi temple. In August,
he offered 80-kilo gold plated doors to the Kukke Subramanya
temple in Karnataka. Possibly he believes that the gods can be
bought off in ways that employees and creditors cannot.

19“Sebi summons Subrata Roy; HC bars Sahara from raising funds,” The Times of India,
March 26, 2013. http://timesofindia.indiatimes.com/business/india-business/Sebi-summons-
Subrata-Roy-HC-bars-Sahara- from-raising-funds/articleshow/19225348.cms, last accessed
on March 31, 2014.
14 of
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How can a man who owes enormous sums to employees and

creditors be free to throw gold around like small change? If
there were any justice, surely the gold and golden doors should
be seized from the temples and handed over to the employees
and creditors. Surely they should have first right to Mallya’s
assets.

… Even if it makes no sense to seize the airline today, why not

seize his liquor business? Why not seize his prize luxury
possessions, ranging from paintings to yachts or jets? Why not
take over his cricket team, Royal Challengers? Why not take
over his football team Mohun Bagan, and his Formula 1 racing
team Force India? Why is he allowed to keep all these, along
with gold that he donates to temples, when he says he doesn’t
have enough to pay employees or suppliers?

He has given personal guarantees to banks: why are these not being
enforced?”20

An Affluent Promoter and a Sick Company

The Finance Minister expressed his views clearly that businesspersons

leading a lavish life with their companies struggling for survival would not be
tolerated. The Economic Times reported:

“Finance Minister P Chidambaram has warned corporate bigwigs

against wilful defaults, reminding promoters that it was their
duty to bring in additional capital if their companies got into
trouble."We cannot have an affluent promoter and a sick
company," he said, in an apparent reference to the collapse of
Kingfisher Airlines, owned by the flamboyant Vijay Mallya.
Banks are stuck with nearly Rs 7,000 crore worth of loans they
had advanced to the grounded airline and now appear almost
impossible to recover.”21

4. FAST-PACED DEVELOPMENTS IN MARCH 2014

A year later in February-March 2014: Roy arrested

The SC had ordered for Roy’s appearance in the court in late February, but
Roy did not appear. His lawyers tried to convince that Roy was by the
bedside of his ailing mother and also produced a medical certificate to the
same effect, but the SC was unmoved and issued a non-bailable warrant for
Roy’s arrest. Cornered, Roy surrendered.

The Times of India reported:

“Sahara chief Subrata Roy was arrested in Lucknow on Friday,
after evading for two days a non-bailable warrant issued by the
Supreme Court for his failure to appear before it in a case of
non-refund of Rs 20,000 crore to investors. Capping a day of
dramatic developments, 65-year old Subrata Roy surrendered
before police this morning after calling them to Sahara
Shaher.”22
15 of
23

20 Aiyar, S. A., “Needed: An exit policy for bad businessmen,” The Times of India, January 6,
2013. http://blogs.timesofindia.indiatimes.com/Swaminomics/entry/needed-an-exit-policy-for-
bad-businessmen, last accessed on March 31, 2014.
21 “FM P Chidambaram warns rich promoters on loan defaults,” The Economic Times, March

19, 2013. http://articles.economictimes.indiatimes.com/2013-03-19/news/37843967_1_bad-

loans-kingfisher-loans-largest- bank, last accessed on March 31, 2014.
22 “Sahara chief Subrata Roy arrested in Lucknow,” The Times of India,

February 28, 2014. http://timesofindia.indiatimes.com/india/Sahara-chief-

Subrata-Roy-arrested-in- Lucknow/articleshow/31151724.cms; last
accessed on March 31, 2014.
16 of
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Roy and Two Directors sent to Tihar Jail

In the absence of any concrete proposal to repay investors, the SC sent Roy
and two directors of his company to Tihar jail in Delhi till the date of further
hearing.

The Hindustan Times reported:

“The Supreme Court on Tuesday sent Sahara group chairman

Subrata Roy and two directors to judicial custody for failing to
comply with its order to refund Rs. 20,000 crore to its investors.
A bench of Justice K S Radhakrishnan and Justice J S Kehar
ordered judicial custody of the 65-year-old Roy and Sahara
directors Ravi Shankar Dubey and Ashok Roy Choudhary till
March 11 after they failed to submit a “concrete proposal” to
repay investors. The three were brought to the Capital’s Tihar
jail at around 8.20pm. The court had on August 31, 2012 said
Sahara’s optionally fully-convertible debenture scheme violated
Securities and Exchange Board of India (Sebi) rules and directed
it to refund investors within three months. The company has so
far refunded more than Rs. 5,120 crore. “Non-compliance of the
orders passed by this court shakes the very foundation of our
judicial system and undermines the rule of law, which we are
bound to honour and protect,” the bench said as a packed
courtroom heard in complete silence. The bench had on
February 26 issued non- bailable arrest warrants against Roy
after he failed to appear in the court. Roy gave himself up to
police in Lucknow after two days of hide and seek.” 23

The SC had accepted Roy’s unconditional apology for not appearing in the
court, but made the serious observation that Roy did not respect the highest
court of the land. How he spent his first night in the jail was the talk of the
town.

The India Today reported:

“Sahara chief Subrata Roy spent his first night on Tuesday in a

single cell of Tihar jail along with two directors of his company.
According to sources, the trio were given a blanket and a bed-
sheet to sleep but they could not sleep properly. Prior to this,
they had been served chanaa dal, rice and roti for dinner in
ward no 4 of Tihar jail's Cell No. 3. Incidentally, this is the same
cell wherein former Samajwadi Party leader Amar Singh had
occupied it in the past. The 65-year-old business tycoon woke
up at 3 in the morning and preferred to have breakfast of jail
canteen. … Roy had tendered an unconditional apology to the
Supreme Court for failing to appear before it in on February 26.
The court accepted the apology but also said this: "We
respected you, but you failed to respect us.”… Roy had sought
exemption from personal appearance on the ground of ill-health
of his 92-year-old mother….”24
The Hindu reported:
17 of
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“Sahara chief Subrata Roy will be provided a bed by the Tihar
Jail authorities as he is above 60 years of age. … As per the
rules in Tihar Jail, a prisoner above 60 years gets a bed to sleep
on and so a bed was placed in Mr. Roy’s cell on
Wednesday…“On

23 “Subrata Roy brought to justice, to cool heels in Tihar for now,” The Hindustan
Times, March 4, 2014. http://www.hindustantimes.com/india-news/sahara-chief-
subrata-roy-apologises-to-sc-for-skipping- hearing/article1-1190735.aspx; last
accessed on March 31, 2014.
24 “Subrata Roy spends sleepless night as aam aadmi in Tihar jail,” India Today Online,

March 4, 2014. http://indiatoday.intoday.in/story/supreme-court-ignores-subrata-roys-

apology-sends-him-to-delhi-police- custody/1/346772.html; last accessed on March 31,
2014.
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Tuesday, on arriving in the jail, Mr. Roy was examined by a

group of doctors who had found him in good health,” said Tihar
Jail spokesperson Sunil Gupta.”25

Conditions for Bail

The SC had acted quite tough and fixed the amount of Rs.10,000 crores – an
unprecedented sum of money – for granting bail. However, the bail was
related to a matter worth Rs.24,000 crores with interest growing every
minute. Even with 1% simple interest every month, it is Rs.240 crores and
thus the daily interest was Rs.8 crores.

The Reuters reported:

“The Supreme Court has agreed to release the head of the

Sahara conglomerate from custody, but only after the group
deposits 100 billion rupees in cash and bank guarantees. Sahara
Chairman Subrata Roy was arrested on February 28 and has
been held in a Delhi jail since March 4 after failing to appear at
a contempt hearing in a long-running legal battle between the
group and the securities regulator over the refund of billions of
dollars to investors in outlawed bonds. In its ruling on
Wednesday, the Supreme Court ordered unlisted Sahara to
deposit 50 billion rupees in cash with the securities regulator as
well as provide bank guarantees for another 50 billion
rupees….”26

Sahara could not pay, Recusal Urged

Sahara expressed its inability to pay such a huge sum and its lawyers
resorted to legal tactics by questioning the decision of the court and also the
neutrality of the judges. They urged the judges hearing the matter to recuse
themselves from the hearing.

The Economic Times reported:

“Sahara on Thursday informed the Supreme Court of its inability

to raise Rs5,000 crore in cash and furnish another Rs5,000 crore
by way of a bank guarantee, terms set on Wednesday by the
top court as a condition for releasing its head Subrata Roy from
Tihar jail.”27

The Hindustan Times reported:

“Roy’s lawyers also continued to challenge what they called his

“illegal” custody. “No process has been followed in sending him
to custody,” senior counsel Ram Jethmalani said, urging the
two-judge bench to recuse itself from hearing the petition
challenging the custody. “Moments are very rare when we have
to tell the court you
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25 “Sahara chief Subrata Roy given bed in Tihar Jail,” The Hindu, March 6,
2014. http://www.thehindu.com/news/cities/Delhi/sahara-chief-subrata-roy-
given-bed-in-tihar- jail/article5754291.ece; last accessed on March 31, 2014.
26 “Court orders Sahara to pay 100 billion rupees to release chairman Roy on bail,” Reuters,

March 26, 2014. http://in.reuters.com/article/2014/03/26/india-sahara-chief-

idINDEEA2P06K20140326; last accessed on March 31, 2014.
27 “Sahara to Supreme Court: Can't deposit Rs 10,000 crore to secure Subrata Roy's

release,” The Economic Times, March 28, 2014.

http://articles.economictimes.indiatimes.com/2014-03-28/news/48662766_1_bank-
guarantee- keshav-mohan-sahara-lawyers; last accessed on March 31, 2014.
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are terribly wrong. This is a very, very extraordinary situation,”

said senior advocate Rajeev Dhawan.” 28

5. OLD TRICKS: DOUBTS AND QUESTIONS

Sahara tried raising Rs.10,000 crores from its employees and the NDTV
reported:

“India's Sahara group said on Saturday its employees were

helping to raise Rs. 10,000 crore in bail money to free the
financial giant's chief Subrata Roy from prison….In a statement,
Sahara said the move by workers to drum up the money was
"an emotional initiative" by the people. But some media
reported that Sahara executives had sent employees emails
urging them to contribute, a claim denied to AFP by an
executive of the company…”29

But there were issues in doing that. Experts had their own doubts.

The CNBC TV 18 Moneycontrol wrote:

“Subrata Roy's Sahara Group has yet again check-mated the

system. This time the group has used the Multi-State
Cooperative Societies Act, 2002. This Act puts both SEBI and RBI
at arm's length, since the regulation of entities under the said
Act comes under the central registrar or state government. That
again raises the issue of jurisdiction. And prima facie it seems
Sebi and RBI don’t have the jurisdiction. But a deeper dive into
the issue can provide the regulators a reason to challenge the
creation of Saharayn Society

...Standalone it will be difficult for any regulator to challenge the

incorporation of this society, but intent can be challenged based
on the letter of DK Srivastav, executive director worker -
Parabanking at the Sahara Group. The letter of DK Srivastav to
its workers clearly states that funds need to be raised for the
purpose of paying the bail amount of Subrata Roy and two
directors. The letter also clearly states that all money needs to
be raised via Saharayn E-Multi Purpose Society Limited. The
regulator can clearly establish that the whole spirit of the Act
has been violated by Sahara Group and hence seek court
direction to check this Sahara Group move. But all this is a far-
fetched argument.

Will the regulator want to open another front? Is election season

the right window for Sahara to raise money? Will the old political
masters and likely new political masters want to interfere in this
issue during election time? Can Supreme Court again step in to
check mate Sahara Group?”30

28 “Sahara doesn’t have bail money, Roy stays in jail,” The Hindustan Times, March 27,
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2014. http://www.hindustantimes.com/india-news/sahara-doesn-t-have-bail-money-roy-
stays-in-jail/article1- 1201171.aspx; last accessed March 31, 2014.
29 “Sahara claims workers are fund-raising for jailed chief Subrata Roy,” NDTV, March 29,

2014. http://www.ndtv.com/article/india/sahara-claims-workers-are-fund-raising-for-jailed-
chief-subrata-roy- 501978; last accessed on March 31, 2014.
30 “Do RBI and Sebi have jurisdiction to check Sahara move?” CNBC TV18 Moneycontrol,

March 29, 2014. http://www.moneycontrol.com/news/cnbc-tv18-comments/do-rbisebi-

have-jurisdiction-to-check-sahara- move_1060420.html; last accessed on March 31, 2014.