India’s Supreme Court yesterday ordered business conglomerate and leading sports sponsor Sahara to refund more than $3 billion it collected from millions of small savers.
The court told Sahara India Real Estate Corp and Sahara Housing Investment Corp., units of the group owned by billionaire tycoon Subrata Roy, to deposit 174 billion rupees ($3.12 billion) with 15 percent interest in a state-run bank.
The court said they had “no right to collect” the funds from the 22 million investors “without complying with any regulatory provisions”.
It added that a retired justice would oversee a probe into actions of the subsidiaries, which it said collected the money in violation of securities rules.
“We direct the money collected to be deposited in a nationalised bank,” the court order said.
Sahara India Pariwar, or Family, straddles finance, infrastructure, housing, media and entertainment, consumer goods, manufacturing and services. It is also a top sponsor of Indian cricket and motor racing.
Roy, a flamboyant businessman, is a hero to millions of poor Indians and one of the country’s best-connected businessmen who counts top politicians, entertainers and cricketers among his friends.
The court warned in the event of “non-compliance”, the Securities Exchange Board of India (SEBI) bourse watchdog could seize property of Sahara, based in Uttar Pradesh state capital Lucknow.
The court order said SEBI would pass the money on to the investors.
The verdict upheld a previous order of a securities tribunal that Sahara had flouted SEBI guidelines while raking in deposits from mainly poor and rural savers.
Sahara had issued bonds to investors that gave them the option to convert the debt repayable by the company into equity shares.
SEBI had ordered the two group companies to return the money as they had “mobilized huge public money in the guise of private placements” without adhering to the regulatory framework.
A Sahara spokesman was not immediately available for comment.
The Supreme Court had previously said Sahara had “exploited” small depositors “in the lower strata of society.”
Roy, who styles himself as the “worker’s friend” has a rags-to-riches story. The son of a poor millworker, his group posted meteoric growth after starting out as a rural savings scheme with just three employees.