The Fall of Sahara and Subrata Roy

28th February 2014 was the day when almost every single newsroom in the nation went into a frenzy. Following hours of high drama, “Saharashri” Subrata Roy surrendered to the police and was arrested in Lucknow’s ‘Sahara Shehar’. Why was the man, who was once delegated among the ten most Powerful People of India, being hunted down by law-enforcement executives with a non-bailable warrant issued against him by the highest court of the land? We shall distinctly elaborate and understand in a very lucid style the circumstances that led to the majestic collapse of The Subrata Roy.

28th February 2014 was the day when almost every single newsroom in the nation went into a frenzy. Now, the enigma that emerges is, what led to this situation? Why was Subrata Roy, the Managing Worker and Chairman of a leading Indian conglomerate Sahara India Pariwar; one of the “10 Most Powerful People of India” as adjudged by India Today; a stakeholder in the premium hospitality division (including a controlling stake in New York’s landmark Plaza Hotel and London’s iconic Grosvenor House Hotel) and an IPL team; and the man who had reportedly spent $60 million in one of the country’s most lavish and expensive weddings of both his sons in 2004 with 10,000 high profile guests including the then Prime Minister; being hunted down by the law enforcement executives? Following hours of high drama, “Saharashri” Subrata Roy surrendered to the police and was arrested in Lucknow’s ‘Sahara Shehar’. Why was a non-bailable warrant issued against him by the highest court of the land? We shall distinctly elaborate and understand in a very lucid style the circumstances that led to the majestic collapse of The Subrata Roy.

SAHARA, literally meaning support or sustenance, was established in 1978 in Gorakhpur, Uttar Pradesh as Sahara India Pariwar on a decent range with a capital of only Rs. 2000 by Subrata Roy. Roy had briefly tried his hands at multiple distinct enterprises and had failed miserably. However, Sahara turned it all around. It matured into a commanding entity on the corporate compass with diversified patronages all over India plus overseas. Sahara continues to boast an image of the planet’s largest family while ironically still being one of the shadiest Indian companies at the very same time. The group claims to have over nine crores of estimated investors and customers complemented by a workforce of more than 12 lakhs (includes salaried employees, consultants, field workers, agents) and a land bank of about 30,970 Acres. The total self-estimated net worth of the group at present stands at Rs. 2,59,900 crore.

Subrata Roy built Sahara in the 70s and 80s. It was a time when the banking interface in the nation was very ineffective and weak. Subrata Roy performed a masterstroke by penetrating the enormous population with scant wages and inadequate banking amenities. People could invest as little as Re 1 and go higher. Sahara enabled these people to save and enhance their earnings through the chit funds it offered. The model involved almost a million agents, ranging from local grocers to milk producers to village authorities and so on. The agents encouraged individual households to sign up and assembled payments from new investors. With such an extraordinary agent channel, Sahara thus lured millions of investors and gathered huge volumes of capital.

Cricket, which unwaveringly became a religion in India, needs special mention in Sahara’s growth narrative. Sahara, being the principal sponsor of the Indian national cricket team for many years, reaped manifold benefits since the blue jersey ended up establishing it as a household name. More and more people began to acknowledge Sahara, therefore supplementing more bountiful investors undeviatingly resulting in more substantial capital being raised. With large sums of money coming in, Sahara had an enhanced privilege to spend. Sahara indulged in massive investments like the Sahara City project in Lucknow, connecting 217 self-sufficient townships and the profoundly grand Aamby Valley City project near Pune. The expense bill also included the indoctrination of Sahara TV along with other supplementary channels. Amidst such exquisite spending, the establishment of Air Sahara as Sahara airlines was perhaps a cherry on the top. Thus, Sahara extended its financial services, education, real estate, media, entertainment, tourism, healthcare, and hospitality.

Sahara by no means was a conventional industry. Instead, it was a reverence with a million-strong sales force, all groomed identically, all-embracing each other with the Sahara salute – pressing the right hand just above the heart, the bosses included. In 2013, exclusively to showcase its strength and patriotism, Sahara gathered tens of thousands of men and women dispersed over the broad ground in tidy rows to sing the national anthem and consequently reaffirmed itself as a nationalist firm amidst the general public while simultaneously attaining a world record.

Trouble sprung in 2010, which resulted in the reservation of a cell for Mr Roy in Tihar Jail, New Delhi. The Securities and Exchange Board of India’s (SEBI) scrutiny into Sahara’s affairs ascertained that two Sahara firms, Indian Real State Corporation and Sahara Housing Investment Corporation, accumulated capital through bonds deemed as illegal. SEBI, as per the procedures, restrained the promoters and directors of Sahara group companies. On August 31, 2012, the Supreme Court pronounced its verdict wherein it directed Sahara to return 24,000 crores along with 15% interest to its millions of investors within three months, perhaps being one of the most substantial penalties ever imposed. Following this, on 5th December 2012, Supreme Court allowed Sahara to repay the entire sum in three instalments – 5,120 crores instantly, 10,000 crores in January 2013, and the outstanding amount by February 2013.

Sahara paid the first instalment. But by February, they failed to pay the second and third instalments. It was followed by SEBI presenting a dynamic plea to the Supreme Court to punish Sahara chief Subrata Roy and the directors of the firms under probe for not complying with its 2012 order of refunding money to the investors with interest. SEBI subsequently got permission from the Supreme Court to freeze all bank and Demat accounts and attached properties of chief Subrata Roy and other directors. On October 28, 2013, Supreme Court ordered Sahara to capitulate title deeds of properties worth Rs.20,000 crore to SEBI.

Furthermore, on February 20, 2014, Supreme Court ordered Subrata Roy to appear before February 26. But Subrata Roy did not oblige. As a consequence, the Supreme Court on the 26th issued a non-bailable arrest warrant against Subrata Roy. The rest, as the world is aware, is HISTORY!

Gaurav Chakraborty is a student pursuing Economics Hons from Jamia Millia Islamia.

Edited by: Diptarka Chatterjee