Sahara : the untold story

368 Pages·2014·2.82 MB·English

by  Bandyopadhyay

SAHARA
THE UNTOLD STORY

TAMAL BANDYOPADHYAY

JAICO PUBLISHING HOUSE
Ahmedabad Bangalore Bhopal Bhubaneswar Chennai
Delhi Hyderabad Kolkata Lucknow Mumbai
Published by Jaico Publishing House
A-2 Jash Chambers, 7-A Sir Phirozshah Mehta Road
Fort, Mumbai – 400 001
[email protected]
www.jaicobooks.com
© Tamal Bandyopadhyay
SAHARA: THE UNTOLD STORY
ISBN 978-81-8495-546-0
First Jaico Impression: 2014
No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical
including photocopying, recording or by any information storage and retrieval system, without permission
in writing from the publishers.
SAHARA INDIA PARIWAR DISCLAIMER

The book Sahara: The Untold Story, written by Shri Tamal Bandyopadhyay, is
based on a particular notion, wrong perceptions supported by limited and skewed
information. Hence, it does not reflect the true and complete picture.

The book portrays Sahara in bad light by attributing unfound facts and
incidents to which we have objections.

The book also overlooks, or at the best just glances over, the contributions
made by Sahara India Pariwar by financially including the poor and rural India,
and inculcating in them the habit of saving, thus paving the road of progress on
the one hand and safeguarding them from the clutches of money lenders and
loans on the other.

This book on Sahara does not explain the fact of how Sahara in its journey of
37 years has become one of the biggest conglomerates of the country just
because of the stout business ethics, quality business practices and years of
relentless services to its customers and depositors, which has generated faith
among crores of our depositors, investors and customers across the country.

The book also forgets to address this core constituent of the story of Sahara
India Pariwar, about whom everyone talks but does not venture to know – the
very poor depositors who have faith in us and whose hard-earned earnings
Sahara is a faithful custodian of, for so many years.

The book at best can be treated as a perspective of the author with all its
defamatory content, insinuation and other objections, which prompted us to
exercise our right to approach the court of law in order to save the interest of the
organization and its crores of depositors and 12 lakhs workers.

By getting the opportunity to put forward our objections and reservation in the
form of a disclaimer in this book, in the best tradition of Sahara and our respect
for a journalist’s freedom, we are allowing the author to publish the book and
withdrawing the case we had filed against the publication of the book.

We are sure that the readers are intelligent enough to see through the maze of
plots and appreciate the values that we stand for and the activities we undertake
for nation building.

We also wish the author success, though we don’t agree with many of the
things and the way they were presented in the book.
To Sir, the late Beetashok Bhattacharya, the window to life and literature during
my college and university days
CONTENTS

Preface

Acknowledgments

PART I

1. Jana-Gana-Mana

Roy: We have taken legal opinion and we are not required to send the
information to Sebi. Our regulator is the ministry of corporate affairs. You
cannot have two regulators like a citizen cannot have two thanas.

Bhave: Sebi is not concerned about the legal opinion. Sebi has asked for the
information and it needs to be submitted.

2. A Peerless Story

In late 1970s, KS Krishnaswamy, then RBI deputy governor, had handed
over an inspection report on Peerless to a bureaucrat in the finance ministry,
DN Ghosh. It was sensational…

3. The Two Meetings that Clinched the Deal

At well past midnight, the RBI deputy governor Leeladhar sent a text
message to governor Reddy: “Sir, mission completed.” Reddy replied,
“Great job. God bless you.”

4. How RBI Tightened the Noose

In December 1996, the income tax department had asked Sahara to furnish a
list of members of Parliament and legislative assemblies who were
supposedly keeping money with the group. In its 10,000-page reply, Sahara
challenged the tax office saying, “if any shortcoming, wrongdoing,
weakness or dishonesty is found in our intention… we should be hanged at
weakness or dishonesty is found in our intention… we should be hanged at
once.”

5. New Board, New Auditors, New Sahara

The venue of the board meeting was the Sahara Star Hotel in Mumbai. The
directors received a red carpet welcome and were ushered into the second
floor ACES Presidential Boardroom. Roy made a dramatic entry through a
lift that descended directly from Sky Lounge, the penthouse… The
atmosphere was charged.

PART II

6. The IPO that Never was

On page 640 in the 934-page Draft Red Herring Prospectus of Sahara Prime
City Ltd filed with Sebi, one critical piece of information was tucked away
that India’s capital market regulator latched on to – Sahara had been fighting
the IT authorities over tax related issues arising from their accepting bond
subscriptions in cash.

7. The Never Ending Battle

Kalawati figures 5,984 times in different locations across northern and
western parts of India on the list of investors, which runs into 112,000
pages.

The name Kalawati hit the national headlines when Congress vice president
Rahul Gandhi met a Dalit widow of the same name on his trip to Vidarbha
in eastern Maharashtra.

8. Roles People Played

A postgraduate in physics and a lawyer by education, India’s capital market
regulator UK Sinha began his career as a probationary officer in the State
Bank of India; former Reserve Bank of India deputy governor V Leeladhar
is a chemical engineer from Kerala University.
PART III

9. The Subrata Roy Myth

“I can only say one thing and you can record it ten times – I have never done
one wrong thing in my life. That’s how I can fight. People can make all sorts
of stories. I call them chandukhana ki kahani (tales from the opium house).”

10.The Road Ahead

Roy insists that he’s not quitting India. He “loves his country and can die for
his country.”

PART IV

Annexure I: Shadow Banking: A Four-Letter Word

Till the cookie crumbled in April 2013, large non-banking firms took in
thousands of crores of rupees from millions of investors in West Bengal.

Annexure II: Epistolary History

As a last resort, Roy wrote to Prime Minister Manmohan Singh on 26 May
2008, seeking his intervention “for protection of interest of millions of
workers.”

Annexure III: Time Line

How the Peerless-RBI, the Sahara-RBI and the Sahara-Sebi dramas unfolded.

People

Institutions

Abbreviations

Author
PREFACE

“All characters appearing in this work are fictitious. Any resemblance to real
persons, living or dead, is purely coincidental.”

This is a typical disclaimer that any work of fiction carries. But this book is
different. None of the charters – living or dead – and incidents mentioned here
are fictional. They all belong to the real world. Sahara: The Untold Story is not a
creative work. It’s a journalistic work – a result of painstaking research to
demystify India’s most secretive and largely unlisted conglomerate, the Sahara
India Pariwar, which has excelled in raising money from people over decades
and courted endless controversies.

I have sifted through thousands of pages of legal papers: affidavits, petitions,
judgments of high courts and India’s apex court; directives and notifications of
regulators, both banking and markets; minutes of closed door meetings; and
media reports. Besides, I have interviewed several people across India who have
been associated with the group in one way or another – regulators, chartered
accountants, legal experts and journalists who track the group.

I have also bought a packet of Davidoff cigarettes (though I am not a smoker)
and a bottle of Grey Goose (and I’m not a vodka drinker either) to appreciate the
finer taste of Subrata Roy, the Sahara India Pariwar boss.

I mention all this to explain my approach to a subject that is extremely
complex – if not anything else, just for the mystery that shrouds it.

This book could well have been called “The Death of a Four-Letter Word”.
When I started the project, my objective was to understand the financial
intermediary called residuary non-banking companies (RNBCs), named so for
the lack of a better word, when two finance ministry bureaucrats were busy
classifying all non-banks in the 1960s.

At the fag end of the day, they were tired but they could not leave their job
unfinished as a cabinet note had to be prepared that night for presentation the