India’s top court yesterday extended custody of Subrata Roy, owner of the financial services group Sahara India Pariwar, until he presents an improved plan to refund $3.9 billion to depositors.
A two-judge panel at the nation’s Supreme Court in New Delhi also remanded two Sahara directors into custody until March 11, the next hearing in the case. Roy had surrendered to police on Feb. 28 after the court issued a non-bailable arrest warrant two days earlier for failing to heed its summons.
Roy needs to provide bank guarantees or something equally concrete before he will be released, the judges said. Repayment documents produced by Sahara in the last 1-1/2 years haven’t been verifiable, they said.
“The court is communicating that promises are not good enough anymore,” Jitendra Nath Gupta, a former executive director at market regulator the Securities and Exchange Board of India, told Bloomberg TV India in Mumbai yesterday. “They have been very patient with Sahara for the last year and a half.”
Roy, who started collecting daily deposits of as little as 30 cents in 1978 and went on to build an $11 billion conglomerate, is fighting charges that his group failed to comply with a court order to repay 240 billion rupees ($3.9 billion). India’s market regulator in June 2011 faulted two of his companies for selling convertible debt without approval and ordered the money refunded.
Ink on Face
The police’s inability last week to locate him at his 365-acre corporate headquarters “Sahara Shaher” in Lucknow, Uttar Pradesh, fueled speculation he was attempting to abscond. Roy cited the need to be at his ailing mother’s bedside for his court absence.
Roy had black ink thrown on his face yesterday by an assailant as he entered the Supreme Court escorted by security personnel. He apologized to the court for failing to appear on Feb. 26.
SEBI has refused to sell Sahara’s properties, saying the assets are geographically dispersed and many of them are not saleable. In a statement yesterday, Sahara said it has offered to “depute hundreds of competent workers” to assist SEBI in verifying documents and said the two parties should work “harmoniously” to honor the court’s verdict.
The financier, who calls himself “Sahara Sri”, is part of the $670 billion shadow-banking industry in Asia’s third-largest economy and owns properties such as New York’s Plaza Hotel, London’s Grosvenor House and at least 120 companies, including television stations, a hospital, a dairy farm, retail shops selling products from detergents to diamonds and a stake in India’s only Formula One racing team. Sahara also claims to own 14,600 hectares (36,000 acres) of land, an area the size of Liechtenstein.
Shadow banking assets in India have increased 20 percent annually in the past five years, according to a November 2012 report by the Financial Stability Board. That makes India the world’s second-fastest-growing market, after Indonesia, for lending outside the banking system, or shadow banking. It also poses risks for a country where, according to World Bank and government data, 65 percent of the population and 92 percent of small businesses don’t have access to banks.