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Tuesday, September 22, 2020

Sahara red-flagged for fraud probe: Rs 86,000 crore from 4 crore depositors

Registrar bans deposits, asks for probe into investment in Aamby Valley; Sahara says all as per law

Written by Khushboo Narayan | Mumbai | Updated: September 3, 2020 11:50:23 am
Sahara red-flagged for fraud probe: Rs 86,000 crore from 4 crore depositorsOver Rs 62,000 crore invested in Aamby Valley, says regulator, “against principles of thrift, co-op societies”. (Express Photo by Sushant Kulkarni)

BETWEEN 2012 and 2014, when two of its group firms were indicted by the Supreme Court and its chief Subrata Roy was arrested, the Sahara Group floated three cooperative societies and collected deposits worth Rs 86,673 crore from as many as four crore depositors, records accessed by The Indian Express show.

These societies — and a fourth one set up in 2010 — and their deposits have been red-flagged by the Government which has called for a probe into a slew of “highly suspect” irregularities that have put depositors’ “hard-earned” money under “serious” risk.

Of the money collected, at least Rs 62,643 crore, regulators said, was invested in the Aamby Valley project in Lonavala in Maharashtra. This is the same project that was attached by the Supreme Court in 2017 and then released in 2019 after several failed attempts to auction the property to repay the depositors of Sahara.

These four societies, floated under the Multi State Cooperative Societies Act, and which come under the purview of the Ministry of Agriculture are: Sahara Credit Cooperative Society Ltd (set up in 2010); Humara India Credit Cooperative Society Ltd; Saharayn Universal Multipurpose Society Ltd; and Stars Multipurpose Cooperative Society Ltd.

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On August 18, Vivek Aggarwal, Joint Secretary, Ministry of Agriculture, who is also Central Registrar of Cooperative Societies, wrote to Ministry of Corporate Affairs (MCA) to initiate a probe by the Serious Fraud Investigation Office (SFIO) into the Sahara Group.

The Registrar’s records show Sahara Credit Cooperative collected deposits of Rs 47,254 crore from nearly 4 crore depositors and invested Rs 28,170 crore in Aamby Valley Ltd; Saharayn Universal collected about Rs 18,000 crore from its 3.71 crore members and invested Rs 17,945 crore; Humara India has deposits of Rs 12,958 crore from 1.8 crore members and invested Rs 19,255 crore and Stars Multipurpose Cooperative collected Rs 8,470 crore from 37 lakh members and invested Rs 6273 crore in Aamby Valley.

In his letter to MCA, Aggarwal said these four societies reveal “fictitious profits” in transaction of shares of Aamby Valley Ltd. “These entities show income from sale of shares whereas such transfers have happened within the group entities only.’

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“The hard-earned money and deposits made by crores of Indian citizens in these four cooperative societies are under serious threat of erosion. All such deposits are now at the mercy of Sahara Group companies especially Aamby Valley, therefore it is expedient in the public interest to order investigation…” said Aggarwal’s letter.

Over the last two months, records show, the Registrar held several hearings and passed orders against these four Sahara societies based on voluminous complaints from several depositors and members across the country.

On August 17, the Registrar indicted Humara India saying that its investments in Aamby Valley Limited were “against the basic principle of thrift and credit cooperative society” and need detailed investigation. The same day, another order pulled up Stars Multipurpose society saying its managing director was not able to provide details of advances of Rs 1800 crore given by the society.

In July, the Registrar questioned Sahara Credit Cooperative’s “massive” Rs 28,000-crore investment in Amby Valley saying it was “against the cooperative principles of credit and thrift society.”

The regulator also found that Sahara Credit Cooperative transferred Rs 2253 crore from society funds to Securities and Exchange Board of India (SEBI) as payment for Sahara Real Estate Limited mandated by the Supreme Court. However, this transfer was recorded as an advance to Subrata Roy.

According to the bye-laws of cooperatives, a society can invest its funds in cooperative banks; government securities; scheduled banks; other cooperatives; subsidiaries; listed companies; and mutual funds, exchange traded funds and index funds regulated by SEBI.

The Indian Express sent a detailed questionnaire to Sahara Group on the key observations made by Aggarwal and his call for a probe.

A Sahara spokesperson replied: “Our society is not accepting any deposit/ contribution from general public, we are only accepting deposits/contribution from our members who are having voting rights in our society. We are investing our money as per the provisions of our bye-laws which were approved by the Central Registrar of Cooperative Societies…(which) in 2018 has specially conducted a special audit of our societies through independent chartered accountant firms and we came clean…there was no violation of bye-laws/ act. We always welcome anytime any type of inspection/ audit”.

The spokesperson said the societies of Sahara have 4 crore depositor members and the money invested in Aamby Valley Ltd was used for “development, operating and credit clearance” of Aamby Valley.

However, records show, in July this year, the Registrar has “prohibited” Humara India, Stars Multipurpose, Sahara Credit Cooperative and Saharayn Universal from taking any fresh deposits from their members.

In January 2019, the Registrar ruled that contributions from members of a society which is retained for a fixed term, as is the case of the Sahara societies, amounts to a deposit. And such deposits received by cooperative societies will come under the purview of The Banning of Unregulated Deposit Schemes Act, 2019, introduced to curb ponzi schemes in the country.

Subsequently, the Registrar approached the Reserve Bank of India (RBI) to seek its opinion on the legality of societies formed by Sahara Group to accept contributions that are in the nature of deposits. The RBI, sources said is yet to respond.

In its defence, Sahara Group submitted a legal opinion of a former Allahabad High Court judge on why its credit cooperative societies will not come under the purview of The Banning of Unregulated Deposit Schemes Act, 2019. The group also said that it has not done anything “illegal” as contributions from regular members of a society is allowed under the credit cooperative bye-laws.

An email and text to the official spokesperson of the RBI did not elicit any response.

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