When the Supreme Court castigated Sahara Parivar chief Subarata Roy, and sent him to judicial custody on Tuesday, one man must have finally permitted himself a smile — K. M. Abraham, former board member of the Securities and Exchange Board of India (SEBI) and the man who investigated the Sahara scam.
If the case survived the numerous obfuscations, dilatory tactics and twists and turns of the last three years, it was entirely due to Dr. Abraham’s watertight order of June 2011. The 99-page order that he put together under conditions of extreme pressure and stress was scholarly and extremely well-researched at one level even as it brilliantly demolished all the false defences put up by Sahara’s lawyers.
Without saying so in so many words, the order highlighted that the two companies — Sahara India Real Estate Corporation (SIREC) and Sahara Housing and Investment Corporation (SHIC) — may actually have been laundering money in the names of fictitious investors. The Supreme Court alluded to this in its observations on Tuesday. Sahara questioned SEBI’s power to regulate optionally fully convertible debentures (OFCDs), and also contended that the funds were raised through private placements and, therefore, not under the market regulator’s purview. SEBI’s order pointed out that the definition of ‘securities’ under the Securities Contracts (Regulation) Act is an inclusive one and not exhaustive and that OFCDs would come under its purview.
Dr. Abraham’s order also held that an offer made to 50 or more persons ceases to be a private placement under the Companies Act. SIREC alone had about 6.6 million investors in its OFCD scheme. Complete details of these investors were not available with SIREC, and Dr. Abraham’s random test of four addresses of ‘investors’ in Mumbai revealed that only two existed and even these two had nothing to do with the Sahara group. This revelation was important to demolish Sahara’s argument that this was a private placement meant for people associated with the group.
Dr. Abraham’s job was not easy because the data provided by SIREC was in the form of scanned images that were not amenable to analysis on a computer. The other company, SHIC, failed to share any information with SEBI. Not surprising then that he commented in his order: “There seems to be an unstated resolve on the part of the two companies not to part with data in any meaningful manner. The thrust seems to be on concealment and obfuscation rather than openness and transparency.”
It must have been gratifying for Dr. Abraham, who is now Additional Chief Secretary, Kerala, when the Supreme Court quoted extensively from his order in its judgment of August 2012, ordering Sahara to refund its investors. After all the hard work, the pressures that he had to endure and the controversies, it is now vindication time for him.
Read more here — http://www.thehindu.com/business/Industry/the-man-who-nailed-sahara/article5754009.ece#