Subrata Roy Sahara’s cup of woe runneth over. At one time in the not-too-distant past, the man was flying high, gifting posh seven-star apartments at Amby Valley to all and sundry.
Today, the poor man is incarcerated in Tihar jail since a year for not being able to refund the money collected from the subscribers of ‘Optionally Fully Convertible Debentures’. He is also the accused in several criminal complaints for allegedly violating the Companies Act.
In sentencing Subrata to jail, the Supreme Court observed that it was necessary to do to “preserve market integrity”, “maintain investors’ confidence” and “control market abuse”.
These findings of the Supreme Court gave SEBI sufficient fodder to launch a crackdown on Subrata’s Mutual Fund. SEBI found that Subrata is the single largest shareholder (holding almost 80% of the total share capital) of Sahara India Financial Corporation Limited, the company which was granted approval to sponsor Sahara Mutual Fund.
SEBI held that Subrata Roy Sahara is the “directing mind and will” and ‘alter ego‘ of the Sahara Mutual Fund’s sponsor.
SEBI also observed that “undesirable elements”, with an “adverse track record” and “atmosphere of mistrust” have to be kept away from the management of a mutual fund because they are not a ‘fit and proper person‘.
The upshot of the order is that the certificate of registration granted to the Sahara Mutual Fund has been cancelled. The trustees have been directed to either transfer the funds to another mutual fund or to redeem the units and pay the investors their dues. The Fund has been given a period of six months to comply with the order.
In a practical sense, there is unlikely to be much loss because the Sahara Mutual Fund is in any case barren of funds.
The flagship Fund, called the ‘Sahara Midcap Fund’, has a paltry AUM of Rs. 5.64 crore. The ‘Banking and Financial Services Fund’ has an AUM of about Rs. 9 crore. The ‘R.E.A.L Fund’ has an AUM of Rs. 4.16 crore and the ‘Classic Fund’ has an AUM of only Rs. 30 lakhs.
Understandably, the performance of the funds is also pathetic.
Now, we have to see whether Subrata Roy Sahara has the good sense to humbly accept SEBI’s order or whether he will throw good money after bad by litigating the matter further.