At its heart, the case that has landed Sahara India chief Subrata Roy in custody is quite simple: two of his group companies — Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC) — claim to have raised about Rs. 24,000 crore from three million investors.
The problem: being unlisted companies, they couldn’t make public offers to mobilise money. Sahara claimed its companies had raised the amount through a private placement, which the two companies could well do under the law.
Read: Subrata Roy sent to police custody till March 4
But here, the group fell foul of a law that states that all placements of shares, debentures, bonds or any other financial instrument to more than 50 investors would be treated as a public offer.
Sahara went to court, arguing that Sebi didn’t have jurisdiction over the matter, but here again it got caught in its own fine print. A draft red herring prospectus of Sahara Prime City, a group real estate firm, had first publicly mentioned the optionally fully convertible unsecured debentures issued by the Sirec and SHIC.
Sahara tried every stratagem to get out of this mess, filing multiple legal proceedings in the Allahabad High Court and the Supreme Court. It even sent 127 truckloads of documents to the Sebi office in Mumbai that contained three million applications for the debenture issue and two million redemption vouchers to prove that it had, indeed, mobilised the money from bona fide investors and that it had repaid a substantial part of its outstanding liabilities.
Read: I am not absconding; ready to follow SC order: Sahara chief
But in the end, Sebi’s determination and the strong stand of the Supreme Court proved too high a mountain to climb for the flamboyant Sahara chief.
However, this may not be the end of the matter. Roy’s detention is only for the limited purpose of forcing him to appear before the Supreme Court on March 4. He had defied an earlier order of the court to appear personally before it on February 26.
What shape the final outcome of this case takes is anybody’s guess.
Read: Sebi-Sahara case: How it all began
Watch: Sahara chief Subrata Roy surrenders