Subrata Roy’s encounter with Supreme Court: From Tihar jail to SEBI’s massive recovery

Why was Subrata Roy Sahara arrested?

Sahara India Real Estate Corporation Ltd (SIRECL) and Sahara Housing Investment Corporation Ltd (SHICL) invited and claim to have collected deposits from the general public including cobblers, labourers, artisans and peasants in the form of what were described as ‘Optional Fully Convertible Debentures’ (OFCD). On a complaint received from the Professional Group of Investors Protection, the SEBI found that the mobilisation of funds under the Red Herring Prospectus (RHP) issued by the two companies was not legally permissible.

In November 2010, by an interim order, SEBI directed the Sahara companies not to offer their equity shares/OFCDS or any other securities to the public or invite subscription in any manner whatsoever either directly or indirectly pending further orders. The companies approached the Bombay High Court against this order. However, while refusing to interfere with SEBI’s directions, the HC directed Subrata Roy along with the company’s directors to refund the amount to the investors with 15 percent interest.
Subsequently, SEBI ordered that the refund of the amount shall be made only in cash through demand drafts or pay orders. The SEBI issued further directions asking Sahara Commodity Services Corporation Ltd and SHICL shall not access the security market for raising funds till the time the aforesaid payments are not made to the satisfaction of the SEBI.

The Sahara companies approached the Securities Appellate Tribunal (SAT) against SEBI’s order. The SAT, while refusing to overturn the SEBI’s order, directed that the money be refunded in six weeks along with the interest. The case finally reached the Supreme Court in 2012 after the Sahara companies filed an appeal against the SAT order.

In August 2012, the SC, while refusing to set aside SEBI’s order directing the companies to refund the money, granted the companies, its directors and Subrata Roy three months’ time to refund the money. According to the SC order, a sum of Rs 5,120 crore was deposited but failed to pay the remaining amount.

While the contempt proceeded to and forth, the court ultimately summoned Sahara and the directors to the court asking them to come up with a concrete plan to pay the rest of the amounts. According to the SC order, “It is noteworthy that the total amount to be deposited is between Rs 33,000 to Rs 35,000 crore.” Since no specific plan was brought to the court, the court on March 4 2014, ordered his judicial custody.

Meanwhile, in March 2014, the SC gave bail to Subrata Roy subject to him depositing Rs 10,000 crore in a stipulated time. However, since he was not able to do so, he remained in custody for two years and two months.

Epilogue

Subrata Roy was ultimately released from Tihar jail in May 2016, to perform his mother's last rites. He remained outside judicial custody till his demise on November 14, 2023. The Sahara companies have deposited Rs 25,000 crore in a specially opened account by the SEBI.

Going by its annual report, SEBI received 19,650 applications involving 53,687 accounts as of March 31, 2023. Of these, "refunds have been made concerning 17,526 applications involving 48,326 accounts for an aggregate amount of Rs 138.07 crore, including the interest amount of Rs 67.98 crore”.
In its previous update, the SEBI had put the total amount refunded by it to investors as of March 31, 2022, at Rs 138 crore concerning 17,526 applications. Further, the SEBI said under various orders passed by the Supreme Court and the attachment orders passed by the regulator, an aggregate amount of Rs 15,646.68 crore has been recovered by it as of March 31, 2023.