India's Supreme Court on Friday ordered the Sahara group to refund more than $3 billion it allegedly collected from millions of small investors, dealing a serious blow to a mysterious tycoon once ranked among India's most powerful businessmen -- who agreed to buy New York's storied Plaza Hotel in April.
The ruling backs an order from the Securities and Exchange Board of India (SEBI), which determined that the Sahara group's drive to raise money through convertible debentures issued by unlisted entities of the group was a violation of Indian regulations, according to the Hindustan Times.
The court did not pull any punches in its assessment of the case, Business Standard reported.
Justice J S Khehar in his remarks expressed that the details of investors submitted were far from satisfactory, the paper said.
"One would not like to make any unrealistic remark, but there is no other option but to record, that the impression emerging from the analysis of the single entry extracted above is, that the same seems totally unrealistic, and may well be, fictitious, concocted and made up," Business Standard quoted Khehar as saying.
Pointing out that the case involves contributions of some $7.25 billion, allegedly collected from the poor rural inhabitants of India, the judge said, "Despite restraint, one is compelled to record, that the whole affair seems to be doubtful, dubious and questionable. Money transactions are not expected to be casual, certainly not in the manner expressed by the two companies," the paper said.
Indian business reporters have long harbored cynicism about the Sahara group's “chit fund” business model, as the company's lavish spending has never quite seemed to gel with the revenue figures logged at its most visible units. And group chairman Subrata Roy Sahara remains an intriguing, and somewhat mysterious figure.
A flambuoyant sports fan who sponsors the Indian cricket team and appears, from the company's web site, to be more interested in social welfare programs than making profits, he runs the business more like a cult than a company – leading his employees in the corporate song each morning, for example.
“'Saharasri' Subrata Roy Sahara, the self proclaimed guardian of the 'world’s biggest family', preaches a new-age religion called Collective Materialism," Krishnaraj Rao, who blogs under the pseudonym "the Brave Pedestrian," pointed out in a fascinating piece earlier this year. (Seriously, click the link).
“Sahara India’s powerpoint presentation (http://tinyurl.com/Subroto-Roy-Sahara-India ) is a proclamation of this superstitious philosophy that throws accounting norms and corporate governance to the winds,” Rao writes. “It boasts, 'In the last 33 years, not even a single dividend has been declared by the group and not even a single rupee has been shared from the profit by anybody.' The same slide claims that 40% (of what? Gross profit? Profit after tax? And of which year exactly?) goes towards 'Welfare of Kartavya Yogis' (presumably meaning employees salaries and agents’ commissions) and 25% towards 'Social Development Activities'.”
At a press conference earlier this year, Roy behaved more like Mao Zedong than Jack Welch, according to this amusing report from FirstPost.in. And in 2005, he created a media frenzy of sorts – as well as newsroom speculation that he'd been diagnosed with HIV, or had a Dave Chappelle-style breakdown (Read: bipolar disorder) – by disappearing for more than a month. (He reappeared, where else, on a Sahara TV channel, where he said rumors about his illness had been spread by "criminal-minded" people, according to the BBC.)
One wonders if today's Supreme Court ruling will be explained away so easily.