Now that Sebi has used the Brahmastra against the Sahara Group - frozen its bank accounts and many assets owned by its promoters - there are several larger points worth commenting on in the case involving Sahara India Real Estate Corporation (SIREC) and Sahara Housing Investment Corporation (SHIC).
In an order dated 31 August 2012, both SIREC and SHIC were ordered to return the money invested in their optional fully convertible debentures (OFCDs) for failing to comply with regulatory requirements. The total amount involved was believed to be in excess of Rs 24,000 crore.
First, there is the deathly silence of politicians. From the start, it is the regulators - Reserve Bank and Sebi - that have been trying to collar the group for its many efforts to stay out of regulatory reach and indulge in barely legal money circulation schemes. The harsh words have come from the regulators and the Supreme Court, but there is not one yip out of politicians. This silence is itself an indicator of the deep links the Sahara Group has with the political class.
Second, Indian cricket is inextricably linked to Sahara cash, which has now been shown to be of doubtful origin. But there is deathly silence here too. The Board of Control for Cricket in India is a huge beneficiary of Sahara's sponsorship largesse, and many cricketers are Sahara brand ambassadors. If Indian cricket is funded by Sahara's cash, isn't it time for the BCCI to start looking for more kosher alternatives?
Third, even the courts have been more than indulgent with Sahara. It's a point we have made before. But now there is a tacit admission that the group may be in contempt. Today's Times of India, for example, quotes Sahara counsel Kishore Lahiri as claiming that the group refunded money to OFCD investors after the Supreme Court judgment of 31 August 2012.
This is what the Times quotes Lahiri as saying: "Sebi has attached properties based on our affidavit in Supreme Court dated January 4, 2012. Since then, a lot of things have changed. After the Supreme Court judgment in August 2012, we have redeemed most of the bondholders. I am aware a part of the money was raised by pledging these (attached) properties as securities with the banks and financial institutions." (Italics ours)
If the Sahara Group paid investors directly even after the judgment, it is clear attempt to get around the Supreme Court judgment. The judgment itself was clear that any money was to be paid to Sebi, and not investors directly.
The Supreme Court order had this to say: "Saharas (SIRECL & SHICL) would refund the amounts collected through RHPs (red herring prospectuses) dated 13.3.2008 and 16.10.2009 along with interest @ 15 percent 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 nationalised bank bearing maximum rate of interest." (italics and bold typefaces are ours).
Now, if the court specifically directed the Saharas to pay the money to Sebi and not to investors directly, especially since Sebi had been tasked with checking the genuineness of the investor base, how did the Saharas repay investors after the judgment? Is this not in clear contempt of the 31 August order? The Supreme Court certainly did not give them this option, nor did the Saharas ask for this in court.
The only way the court can overlook this is if the Sahara counsel now claims he has been misquoted.
To be sure, the Saharas seem to have been in technical contempt of even the more recent December 2012 order of another bench of the Supreme Court headed by the Chief Justice. This bench ordered the group to pay Rs 5,120 crore immediately to Sebi, another Rs 10,000 crore in January and the balance of the OFCD money in February. While Sahara has sought the court's indulgence to offer a bank guarantee instead of actually paying the cash, the fact remains that so far the court has not allowed this, and Sahara remains non-compliant even on this score.
The question is, if the Saharas really had the cash, or if they had been able to liquidate their realty assets, would they not have been able to pay up first to comply with the court order and then seek to replace it with a guarantee?
At a hearing last week, the same two-judge bench that gave the August verdict asked Sebi to stop pussyfooting around the judgment and implement it in toto. "We wonder whether Sahara is committing contempt (of court) or you are committing contempt," the bench observed. "You have done nothing, except issue notices after notices (to Sahara). Who is committing contempt?"
Sebi has now moved to do its bit to bring the Saharas to justice. That still leaves the Supreme Court with the other question: which is the only party still in contempt of its 31 August order?
More From R Jagannathan.