But where are the investors?

More than a year has passed since the Supreme Court ordered two Sahara Group companies to return to SEBI over Rs 24,000 crore raised through optionally fully convertible debentures (OFCD). The money, to be deposited within three months of the court order on August 31, 2012, was to be refunded to nearly 3 crore investors who had ostensibly subscribed to the OFCDs. The role of the capital markets regulator was to refund investors after ascertaining their genuineness. The deadline is long over and Sahara has coughed up only Rs 5,120 crore so far, even while claiming that most investors had already been refunded.

This and Sahara’s continuing obfuscatory tactics are nothing but an open defiance of the apex court. But the twists and turns in this seemingly interminable courtroom saga raises an obvious question — is this case fundamentally one about investor grievances? Irrespective of what SEBI claims and what the Supreme Court seems to believe, the answer is no. There are good reasons to think there were never 3 crore Sahara investors in the first place. Though SEBI’s website carries a running ticker inviting investors to seek refund, there have been claims from a very small number of subscribers, for sums running into a few lakhs. The fact is that the bulk of the investors simply haven’t come forward; they are phantoms, untraceable despite the magnitude of the scam.

It raises a further question. If these are fictitious investors, who were a part of an elaborate money-laundering scheme, then, is SEBI — which is mandated to protect investors — the right organisation to be fighting this case? Should we be surprised that despite openly seeking out complainants, SEBI has made precious little headway? Wouldn’t it have been far better if the case was treated as a money-laundering one and left from the very beginning to the Enforcement Directorate? The ED, which has recently registered two cases on the issue, will investigate, among other things, whether the missing money has been transferred out of the country and whether a large number of the investors were phantoms — in effect, conduct the kind of probe that SEBI isn’t capable of.

It is time the Sahara case is not treated as principally one in which a company engaged in shadowy para-banking activity and thereby violated capital market regulations. The Supreme Court has put pressure on the group by preventing the sale of any of its properties and demanding that it submit original title deeds of land worth Rs 20,000 crore to SEBI. But the full truth of the Sahara story — the one about phantom investors and missing sums of money — is likely to be uncovered only by cases registered under the Prevention of Money Laundering Act (PMLA).

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