What is the ₹25,000 Crore Sahara India Parivar Scam?

“Risk Hai to Ishq Hai!!”

If you have heard this dialogue, then you must have watched Hansal Mehta's popular series “Scam.” Or heard its immensely viral music, whose lyrics are still a mystery. 🤔

The intriguing and exhilarating stock market scam stories of Harshad Mehta and Abdul Karim Telgi attracted lots of attention and is now buzzing with the arrival of another sequel.

Director Hansal Mehta’s third season will tell the story of Sahara Group’s Chairperson Subrata Roy. This instalment will be based on the book Sahara: The Untold Story by Tamal Bandyopadhyay and will include the tale of Subrata Roy and the scandalous ₹25,000 crore investor fraud.

If you are finding it difficult to wait for the series’ release (because I am), then let’s uncover what this scam is about.

Birth of a Smart Idea: The Beginning

The trailer release of the “Scam” series caused a mixed reaction, with most of the audience excited, except for the Sahara India Pariwar. The main character of the series, Subrata Roy, aka Saharashri, died in November 2023. Yeah, that’s how Subrata Roy was addressed by his employees and followers. 😅

The timing of the show and the fact that the investment fraud case is still ongoing, Sahara India Pariwar wasn’t happy with the show's announcement. It is opposing the show with a combination of choice words like “abusive, condemnable, attention-seeking, etc. That’s not all! The company has threatened to take legal action against the show and the director if the show isn't cancelled.

Now, in my opinion, the chances of Hansal Mehta paying heed to the warning and cancelling the show seem highly unlikely. Do you know why? Because the story of the ₹25,000 crore scandal is not only big, but it's way more interesting.

Before we start the story, here’s a statement from Subrata Roy during his legal trial:

“If they can find one thing in the last 32 years that Sahara has done against the law, then they can hang me.”

Keep this statement in mind as you read his story so that you can ultimately decide who's at fault.

Once upon a time, just like any other rags-to-riches story, a simple man was working hard to earn his keep. Selling chips and other snacks on his motorcycle every day, Subrata Roy recognised one problem which every other person was suffering from: the inability to use their money to create retirement capital.  

This issue is still relevant as only 67% of Indians plan for a secure future. Subrata Roy saw potential in this sector and encouraged people to invest a small amount of their earnings with him, promising to triple it in just three months. Sounds familiar, right?

Just like Hera Pheri’s Raju, Subrata Roy started utilising the network he had created by selling snacks and slowly building a major empire. The thing that attracted people the most was that anyone could invest in the scheme at a minimum of ₹1 at that time. This allowed even middle—and lower-class families to invest their hard-earned money with the idea of receiving double the amount back.

Additionally, he established a small company named "Sahara" with an initial investment of just ₹2,000. Sahara acquired the license of RNBC (Residual Non-Banking Company), which allowed it to invest public money in various investment options and then pay selective interest as pre-decided.

In this way, Subrata Roy's legacy and the creation of a net worth of over ₹2.6 lakh crore began. Now, Ye to sirf trailer tha, picture to abhi baki hai, dear reader!

How Did Subrata Roy’s Scheme Make Him Money?

At the beginning, Subrata Roy did return the doubled amount within the 3 months duration to the investors. In case you are wondering how he did it, it’s a simple mathematical equation!

Suppose Ayush invested ₹20 in the scheme in May then he would be liable to receive ₹40 by July, right? Well, by July, another investor, Anita, invested ₹40 in the scheme. Anita’s money would then be given to Ayush, hence receiving trust & loyalty from his investors.

In this way, slowly, his business began booming, with multiple investors making investments many times a year. But now the question arises: If all the money was circulating from one investor to another, how did Sahara earn money?

Well, that’s the thing about schemes like these: they specialise in making a fool out of many people for a long time. I am not even saying this as sarcasm. You will see!

Subrata Roy also began making a few of the investors as agents of the company to bring more & more investors with the promise of a good commission. These agents also had another major role. Whenever any investor came for their refund after 3 months, the agents introduced them to a new scheme.

This scheme came with the shining mirage of better returns and longer lock-in periods. Hence, more and more people started investing in Subrata Roy’s Sahara India Pariwar company and he became richer and richer everyday. After all, he could now hold on to returning money to people for a longer time.

In this way, Subrata Roy took the capital and began diversifying the company to different ventures such as Mass Media & Entertainment, Real Estate, Manufacturing, Life insurance, IT, Retail, and more.
Sneaky, right?

Accomplishments of Sahara India Under Subrata Roy

The glory of Subrata Roy’s success was rapidly spreading to different corners of the nation. His small company was now a conglomerate with its fingers in different sectors of the business world. But our main character was not satisfied with this.

Subrata Roy wanted to make “Sahara” an equilibrium symbol of nationality and India. Interestingly, he got his wish accomplished. Think about it. When you hear the word “Sahara” doesn’t Team India’s cricket team come to mind?

Here’s a little replay of the different arenas Sahara India Pariwar hoisted its flag in:

• In 1991, Subrata Roy founded Air Sahara, and it was then sold to Jet Airways in 2007.
• In 2000, Sahara launched its TV network named Sahara One.
• Sponsored the Indian Cricket Team from 2001 to 2013.
• Brought Sahara’s own news channel, “Sahara News” in 2003.
• In 2011, it bought its first IPL team, “Pune Warriors”.

Everything was going wonderfully well for the Saharashri Subrata Roy and his company. He was a business personality who the people of India adored. He had connections with other influential personalities in the nation, including politicians, actors, sportspeople, and more.  

What Went Wrong?

Just like any movie, there was an official who found the scheme of Sahara India suspicious. His name was Prashanjeet Singh, and he was assistant commissioner of income tax in 1996. He sent two notices to the Sahara India Pariwar asking for the names of the MLAs, MPs, and MLCs who have deposited in the scheme. To this notice, Sahara replied that no such depositors were associated with its scheme.

Lucknow's income tax department was not satisfied with the answer and asked for more details. As per the book, Sahara India informed the IT department that checking its system would require more than 200 days as there are crores of depositors, and much data is recorded in Hindi. It published a full-page advertisement with Subrata Roy’s words, including phrases like “Hear No Evil, See No Evil, Speak No Evil”.
It continued postponing submitting requested documents even when SEBI requested the list of OFCD investors, saying that this request was out of SEBI’s jurisdiction.

In fact, in 1997, Sahara got a full-page news article printed involving names of prominent politicians like Prime Ministers P.V. Narasimha Rao, Atal Bihari Vajpayee, and Chandra Sekhar, Central Ministers like Mulayam Singh Yadav, etc. are a part of Sahara Gold Scheme. This particular scheme has had a deposit of around ₹400 crore in 2 years.

Embarrassing the IT department, Subrata Roy was able to blow off the suspicion, and soon Prashanjeet Singh and his associates received a transfer from Lucknow. People who adored Subrata Roy also came out in support on the roads, helping the conglomerate flourish its reputation and prowess.

In 2004, Subrata Roy spent over ₹550 crore for his two sons' wedding. We get amazed by wedding spendings now, take a break and think about this. The guest list included names like Anil Ambani, Amitabh Bachchan, Mulayam Singh Yadav, etc.

But when everything was going so well, what brought Sahara again into the eyes of the allegations?

The Guinness World Record for the largest crowd to sing the National Song in India was the event of Bharat Bhawana Diwas, celebrated on 6 May. This event was organised by the Sahara Group and was headed by Subrata Roy, and 1,21,653 people sang Vande Mataram making the record.

The Fight Between Subrata Roy & SEBI

Well, Subrata Roy wanted to make his company public, so he decided to bring an IPO in 2009. For this, Sahara filed a DRHP with SEBI in September 2009.

Now, in case you aren’t aware, SEBI analyses a company’s past financial records of many years, management, promoter shareholding, and many other fundamentals before giving a green check. So, SEBI began its usual routine when it received many hand-written notes from different parts of India.
The note's content raised allegations on how Sahara Pariwar’s 2 companies, “Sahara India Real Estate” and “Sahara Housing Investment Corporation”, have raised huge amounts of capital from issued bonds, which is not legal.

Sahara was raising capital via Optionally Fully Convertible Debentures (OFCD) which is a debt instrument. This means that people investing in OFCD get a regular interest payment and the chance to convert their debt into shares if the company's stock price increases.

Now, Sahara Pariwar didn’t take SEBI’s approval to raise money from over 2 crore Indians via OFCD which caused the market regulator to place a ban on Sahara from doing so in the future. But Subrata Roy had connections to top places in the food chain which gave him too much power.

SEBI didn’t have the freedom to investigate independently, and the High Court rejected its plea to do so. Our market regulator is not one to give up, as it took the case to the Supreme Court and received a decision in its favour. SEBI then demanded Sahara India immediately refund all the capital it had raised from the two companies mentioned above.

Returning over ₹25,000 crore was not exactly ideal for Subrata Roy, so he went knocking on the doors of the Security Appellate Tribunal, aka SAT. Investigating on its own, SAT refused Sahara’s plea, which claimed that SEBI was making false allegations against it.

In 2012, the Supreme Court finally intervened and ordered Sahara India to return all the capital to the public with a 15% interest. That’s not all! It also sent Roy to prison and gave the company 90 days to complete the transaction in 3 instalments.

The first instalment of ₹5,120 crore was paid by Sahara India companies and then Roy claimed of providing 90% of the ₹25,000 crore to depositors in cash. Like anyone (Supreme Court, SEBI or the public) was going to believe it. In 2013, Subrata Roy then brought 127 trucks with 31,6669 card boxes filled with 3+ crore applications and 2 crore redemption vouchers.

For an organisation as big as SEBI, going through crores of documents is bound to take years and that was what Roy was betting on. But, SEBI showed why it is the market regulator of India by completing the tasks in a few days. They also sent notices to addresses of depositors in the applications and received 4,600 claims from over 3 crore forms. This means that most of the applications from Sahara India were false depositors.

What does this mean? This means that Subrata Roy might have a big mountain of black money in his coffers. Who does this money belong to is still a mystery as the case is still ongoing at the Supreme Court.

The Bottom Line

Bharat Bhawana Diwas on 6 May, around 1.1 million employees of the Sahara India Pariwar gathered in multiple venues nationwide to honour the man. Then, the suspicious activities came to light, turning the public's opinion 180 degrees. People showed outrage when Subrata Roy was arrested, and his wrongdoings came to light.

But then in 2016 the man came out on parole and got busy in other operations. After that first instalment of ₹5,000 crore, no more money was provided from Sahara Group’s end. Although there is a website named “Sahara Refund Portal” that was launched in 2023 to help people get their money back, I am not sure whether its’ fully feasible. Know more about the refund portal from this article link.

In November 2023, Subrata Roy died of a heart attack. But his story will remain behind, teaching many lessons to people of all generations. It would be interesting to see whether the upcoming series will glorify Subrata Roy like Harshad Mehta or not.

Want to know more about such scams? Then check out this article: The Infamous Scams of India’s Biggest Scamsters.