The Supreme Court’s decision to order the arrest of Sahara Group chief Subrata Roy by issuing a non-bailable warrant against him (26 February) signals the end of what seemed like an inexhaustible supply of patience with him. Indications that it would refuse to indulge him any more came on 20 February, when the court ordered him and his three directors to physically appear in court.
The court said then: "We cannot keep begging you for payment of the money. If they (Sahara Group) don't want to pay the money, then they can go to some other place." That "some other place" is obviously jail, and the money the court referred to was the Rs 24,000 crore that the court had ordered him to repay 19 months ago.
He still hasn't done so. So it will be "some other place" for him, now that he has also failed to appear on court today. This could mean his arrest over the next few days and production in court by 4 March. Or it could mean Roy could voluntarily turn up in court by that day and seek the court’s pardon.
There is also a remote possibility that Roy’s lawyers could yet try and get the SC to hold the warrant in abeyance on the promise that will turn up voluntarily – but this is unlikely since the court has been extremely perturbed and angry that Roy has been flouting its orders and refusing to comply.
It has taken the highest court in the land nearly 19 months to bring Roy to heel even though it has still not been able enforce its own order of 31 August 2012 that two of his group companies – Sahara India Real Estate Corporation and Sahara Housing Investment Corporation – should return Rs 24,000 crore raised from investors with interest.
These amounts were raised through the issue of optionally fully convertible debentures (OFCDs) through an illegal private placement – basically with the intent of avoiding Sebi scrutiny. Not only did Sahara not comply with the Supreme Court’s order, but as of today it has paid up only Rs 5,120 crore, claiming the rest has been paid.
There is no proof of this. The Supreme Court had been watching the group delay the inevitable by repeated court challenges and excuses, but this patience ran out last Thursday when the court ordered Roy to turn up in court along with three of his directors. The three appeared, but if Roy thought this would mollify the court, he was mistaken. The court showed no leniency even though Roy claimed his mother was on her death-bed.
The controversial group has been running rings around the Supreme Court and Sebi ever since the final order of the Supreme Court in the OFCD case in August 2012. That verdict (read the full order here), delivered by a two-judge bench comprising Justice KS Radhakrishnan and Justice JS Khehar, the same bench hearing the case now, established several things. Among them:
- Two Sahara companies, Sahara India Real Estate Corporation and Sahara Housing Investment Corporation, had illegally raised humongous amounts of money from the public through OFCDs by calling it private placement.
- The order also suggested that Sahara's investors may not all be bona fide. Subsequent efforts by Sebi to get lists of genuine investors have proved the point that a significant number of Sahara's investors did not exist.
- The court ordered the two companies to repay an amount of over Rs 24,000 crore to Sebi within 90 days (i.e. 30 November 2012). The regulator will then distribute the money to bonafide investors after verifying their antecedents.
- To ensure compliance, the Supreme Court asked Justice BN Agarwal, a former Supreme Court judge, to assist Sebi and oversee the implementation of its orders. Prima facie, the Sahara group has stood in open defiance of this Supreme Court order since it has
(1) not paid Sebi the full amounts mentioned despite time extensions;
(2) and has claimed that most of the money was repaid
- something it did not disclose when the case was being heard. Earlier, the group claimed that it had nearly three crore investors in the OFCDs, but after the judgment came, it said most of the money was repaid in the interim.
Could three crore small investors have been repaid in months? However, it is also clear that the Supreme Court handled him with kid gloves all the time – as the following facts show.
#1: The court did not quite discipline Sahara when it failed to pay up by 30 November 2012.
#2: Within months of the August order, another bench of the Supreme Court, this time headed by the then Chief Justice, Altamas Kabir, formally gave Sahara time till February 2013 to comply with the order. But even by the end of February the Sahara group had paid up only Rs 5,120 crore, claiming the rest had been repaid.
#3: At hearings in October 2013, the Supreme Court, this time headed by the same judges who handed down the 31 August 2012 verdict, seemed irritated with the Saharas - but still keen to get Subrata Roy to comply amicably.
The court seemed to offer the group a way out by asking if it can provide a bank guarantee for nearly Rs 20,000 crore, but the group was still pushing for Sebi to accept alternate collateral like properties. Sebi declined, and its counsel Arvind Datar emphasised this: "I have been dealing with the group for the past four years.
It is not a group playing cricket. Not a single request has been complied with. They claim they have assets worth Rs 60,000 crore now. The dues are only a third," reports Business Standard. To be sure, the judges were not amused. According to Business Standard, the court hinted that group officials could be detained till the order of August last year was fully complied with.
When Sahara's counsel suggested that Subrata Roy was not liable to contempt, a testy Justice Khehar suggested that the court would "try to find a way out" and pointed to a 1960 judgment which allowed detention till court orders were complied with.
It was only at the 20 February hearing that the bench, its patience fully exhausted, ordered Roy and three directors to appear in court – or it could send them “to another place.” Subrata Roy may well end up in that other place. It’s called jail.
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