DH Deciphers | How Subrata Roy’s death will affect Sahara investors?

New Delhi: The death of Sahara Group founder Subrata Roy has once again brought the spotlight back on the future of the money that millions of people invested in various Sahara Group companies and cooperatives. Roy, who was accused of running Ponzi schemes to dupe small investors, was released on parole in 2016 after spending more than two years in jail. The capital market regulator, the Securities and Exchange Board of India (SEBI), which has accused Roy of various irregularities and running the Ponzi schemes, has recovered Rs 25,000 crore from the Sahara Group.

In this issue of DH Deciphers, Gyanendra Keshri decodes the impact of Roy’s death on the money deposited with SEBI and its return to investors.

What are the legal issues against Subrata Roy?

Legal troubles for Subrata Roy started in 2010 when SEBI flagged irregularities in his group entities and restrained him from raising money from the public. The markets regulator asked two Sahara Group entities – Sahara India Real Estate Corporation and Sahara Housing Investment Corporation – not to mobilise money from equity markets or from the issuance of any security to the public. In June 2011, SEBI directed these two companies to refund money raised from investors through Optionally Fully Convertible Debentures (OFCDs). In August 2012, the Supreme Court upheld SEBI’s directions and asked these two firms to return money to investors with 15% annual interest. Subrata Roy was arrested in 2014 on the orders of the apex court after he failed to appear before it in a contempt case arising out of non-refund of money to investors. Roy was released on parole in 2016 after spending more than two years in Tihar jail in Delhi. Other Sahara group firms have also been accused of irregularities. Roy was the main accused in the cases. At the time of his death due to cardiorespiratory arrest on November 14, he was on bail.

What will happen to the cases now?

Cases of financial irregularities and fraud are against Sahara Group entities. Roy was made the main accused and put behind bars as head of the group entities. SEBI chairperson Madhabi Puri Buch has clarified that the market regulator would continue to pursue the cases. Hence, his death doesn’t change anything for the regulator.

What is the status of the money recovered from Sahara group?

As per the orders of the Supreme Court, Sahara Group has deposited money in specially-opened bank accounts for the repayments to investors. Sahara group entities are estimated to have made deposits of around Rs 24,000 crore. The special accounts are in the nationalised banks and controlled by SEBI. Along with accrued interest, the total deposits in such special accounts stood at Rs 25,163 crore as on March 31, 2023. As per SEBI’s latest annual report, Rs 138.07 crore money has been refunded to investors of two Sahara group entities over 11 years, including Rs 67.98 crore in interest. SEBI it has received 19,650 applications involving 53,687 accounts as of March 31. Out of these, refunds were made for 17,526 applications.

What is the involvement of the central government?

Following a Supreme Court order, Rs 5,000 crore from the Sahara-SEBI refund account has been transferred to the Central Registrar of Cooperative Societies (CRCS). In March, the government announced that the money would be returned to 10 crore investors of four Sahara group firms within 9 months. CRCS-Sahara Refund Portal was launched in July to facilitate the return of the money.