In Sahara case, law itself has been victimised

Sahara represents the ultimate test of the conflict between the rule of law and dispensation of justice

If you hold the belief that what the law provides is irrelevant, so long as someone who has committed a horrible wrong is handed down a severe punishment by the law enforcement system, read no further because this piece is not for you. For, it is about the curious drama the country has witnessed in recent weeks in the complex case of Sahara, the Securities and Exchange Board of India (Sebi), and the detention of Sahara's founder Subrata Roy in jail. This case is very important, not for what Sahara and Roy have done or are going through, but for what someone not in the same league can face in the future. This piece is about the rule of law.

A short recap would be in order. It has been conclusively held that Sahara raised several tens of thousands of crores of money from millions of investors without complying with securities regulations. These regulations require the writing of a prospectus setting out the terms on which the funds would be raised, the purposes for which they would be used, and the manner in which the investors would be serviced. Sebi directed Sahara to refund to the investors all monies wrongly raised, and to prove that the funds had indeed been repaid. The Securities Appellate Tribunal dismissed Sahara's appeal, comprehensively holding in favour of Sebi. The Supreme Court upheld the Tribunal's decision. Therefore, Sahara now had to repay the amounts raised illegally, and demonstrate the repayment.

According to Sahara, the tens of thousands of investors who it claims to have raised monies from are not complaining, and they are being repaid only because of Sebi's directions.

However, Sahara is just unable to demonstrate who the investors are, where they live, and how they have been repaid. In short, it is quite evident to anyone following the case, that in all likelihood, the investors do not exist. Now, that changes not just the shade or complexion of the case, but even the very basic colour of elements involved. If the investors do not exist, it would point to the inference that the tens of thousands of crores of money in the balance sheets and bank accounts of the Sahara companies are from sources that cannot even be demonstrated. If that were true, it would mean that fantastic amounts of cash are converted into bank balances. In the eyes of law, it would be a case of alleged money laundering.

Money laundering is governed by the Prevention of Money Laundering Act - a legislation passed by Parliament after enormous difficulty. It is a special law that statutorily obliges officers of Sebi and the Reserve Bank of India to assist the anti-money-laundering authorities who draw power under that law. Under that law, accounts can be frozen, assets attached, violators legitimately sent to jail, and properties forfeited.

Curiously, based on publicly known information, so far there has not been a single official whisper from any quarter about this law despite this being the statute that has the closest connection to the facts of the case.

Sahara has had a curious style of defending itself. It has perhaps engaged the best lawyers in the country, but adopted the worst public relations strategy anyone could adopt. While its lawyers have done the best anyone can do inside the court room, Sahara has done the worst any client can do outside. Full-page advertisements in bad grammar and worse syntax narrate its version of logic, struggling to impress its point of view upon the reader. During the proceedings, Roy threw a party for his grandchild's first birthday, only to be attended by anyone who could hold any public office of consequence - ranging from the Speaker of the Lok Sabha to ministers in the government and opposition leaders, a strong show of strength was displayed.

Roy's antics led to the Supreme Court asking him to remain present in court and he kept evading showing up, leading to an arrest ordered by the Supreme Court. The only available law to support such detention is contempt of court. No criminal trial has taken place - for that one would need specificity on what is the amount raised, do the investors at all exist, which law has been breached, and why a citizen should be put behind bars should be clear for history to know. In this case, what is the amount of money raised, who it was raised from, which law enables detention, and what should be the correct law to be enforced, remain unclear. As week after week goes by with the Supreme Court not relenting to release Roy from jail, elections to the Lok Sabha and many a state legislature loom large over the country. The biggest consumer of laundered funds during elections is the political system.

The rule of law is about applying designated horses to run designated courses. The law that is indeed applicable is the one that should be applied, the authorities that are empowered to enforce that law should adopt enforcement action, and those who are sent to jail should go in only on very clear and specific terms and grounds. Breach the rule of law while enforcing law, and you victimise the law itself, and not the individual involved. It can have a counter-productive effect, too: in future, cases less deserving of harsh action can be handed down serious injustice, citing precedence.

The author is a partner of JSA, Advocates & Solicitors. The views expressed herein are his own.
somasekhar@jsalaw.com