Red letter

14 September 2012 By Jeff Glekin

The chairman of India’s securities watchdog is under a cloud. Last year, a deputy wrote to the prime minister alleging his boss was going easy on Sahara. Now that the conglomerate has been ordered to repay $5 bln to 30 mln investors, the regulator needs to show his independence.

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India’s Supreme Court on Aug. 31 ordered the Sahara conglomerate to refund $4.3 billion it had raised from around 30 million small investors, reaffirming an order from the capital markets regulator of June 2011. The Supreme Court also ordered Sahara to pay 15 percent interest to investors, taking the total payout to more than $5 billion.
The court directed two Sahara firms to furnish the Securities and Exchange Board of India (SEBI) with all the details of their issuance of optionally fully convertible debentures (OFCD), subscriptions and refunds within 10 days.
Sahara Group accused SEBI of acting in vengeance, in a report in the Business Standard on Sept. 13, after the regulator failed to acknowledge a truck carrying documents. Sahara said a truck was refused entry as it arrived after the close of business hours on Sept. 10, the deadline imposed by the Supreme Court.
Sahara has 90 days to deposit around $5 billion with SEBI. The regulator has been authorized by the court to take recourse to all legal remedies, including attachment and sale of property, and freezing of bank accounts of Sahara firms for recovery of the money if it is not refunded in the next three months.
In a letter dated Oct. 2011 Kandathil Mathew Abraham, the number two at SEBI at the time, and the author of the original order against Sahara, wrote to the Prime Minister, Manmohan Singh. He alleged that the Chairman of SEBI, Upendra Kumar Sinha was under pressure from the then Finance Minister, Pranab Mukherjee, to deal leniently with a number of high profile cases, including that of Sahara.

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