Getting ready for the anniversary

The Securities and Exchange Board of India (Sebi) sought contempt action saying it has already been "243 days" since the Supreme Court ordered refund of money collected by the Sahara group and investors have got zilch. The court put off action on contempt by some 70-odd days citing, among other things, "paucity of time". Though the court has given a go-ahead to refund "genuine investors", matters have become complicated.

Sebi says it has sent letters to some 21,000 people from the addresses Sahara has given and of these, only 280 or a little over one per cent have responded with necessary documents. Can Sebi now go ahead and consider the remaining 20,720 people as non-genuine and remit the money to the government of India, by direction number eight of the August 31 order of the apex court?

Sorry. This is where direction number seven, pointed out by the bench last week, comes into play. It says, "An opportunity shall be afforded to Saharas to satisfactorily establish the same as being legitimate and valid. It shall be open to the Saharas, in such an eventuality to associate the concerned subscribers to establish their claims. The decision of Sebi (WTM) in this behalf will be final and binding on Saharas, as well as the subscribers."

Sahara says it can spot each and every investor and wants a mutually agreeable mechanism for it. The group has been claiming for years now that its investors are unbanked. Forget Permanent Account Number (PAN), they don't even have permanent addresses, according to the group. What could be an agreeable mechanism to ascertain the genuineness of the subscribers? Sahara says it has provided the services of 57 officers, which Sebi can make use of. How many centuries would such manual checks take to establish the claims of 99 per cent of the 30 million subscribers? Sebi probably has to poach Nandan Nilekani from his current job and make Sahara pay him (Direction number five provides for this).

A second observation made last week is even trickier. The court said it cannot accept refunds made after August 31 as good. Does this mean refunds made before August 31 can be accepted as good? Sahara would think so. Which means the liabilities would be much lesser than Rs 24,000 crore plus interest. Sebi told the Supreme Court that according to data provided by the group, Sahara has refunded Rs 4,748 crore after August 31. Sahara claims after all the premature refunds, only Rs 2,620 crore is due.

If the court disallows payments made after August 31, total dues will come to Rs 7,368 crore. Of this, Sahara has already paid Sebi Rs 5,120 crore. Does this mean Sahara has to pay Sebi only Rs 2,248 crore more instead of the Rs 20,000 crore as claimed earlier? Sebi has some solace in Direction 3, which says, "We make it clear that if the documents produced by Saharas are not found genuine or acceptable, then Sebi (WTM) would proceed as if the Saharas had not refunded any amount to the real and genuine subscribers…"

A couple of adjournments more and we would be celebrating the first anniversary of the landmark order. And, before we know, it could well be several years, like in the case of the Pearl group. Read here: http://bit.ly/17jVfXi