Subrata Roy, the Indian billionaire and owner of the Sahara Group, has been arrested in Lucknow, India over issuing illegal bonds worth over 240 billion rupees ($3.9 billion). The Sahara Group which has assets worth $11 billion happens to also be India’s largest private sector employer with over 1.1 million employees. The international real estate assets owned by this company include iconic names such as The Plaza Hotel in New York, and the Grosvenor House in London. In addition, this conglomerate which consists of 120 companies, owns India’s only Formula One racing team, a few IPL Cricket Teams,television stations, newspapers, a movie production company and retail stores that sell everything from detergent to diamonds. The Sahara Group has a strong presence in the housing, finance, manufacturing and aviation sectors as well.
After the country’s Railways, a public sector company, Sahara Group is India’s second largest employer. A self made billionaire, Roy began his business venture over 35 years ago in 1978. Legend has it that he literally went from door to door seeking investors. He accepted deposits from the marginalized poor of India who had irregular sources of income. His initial investors were people like taxi drivers, and shoe repairmen whose deposits were often not more than a few cents. From these humble beginnings,his meteoric rise to fame and fortune has made Roy and the Sahara Group a household name in India. For years, the Sahara group were the official sponsors of the national cricket team and advertisements of their business services were ubiquitous around India.
Subrata Roy will remain in police custody until March 4, 2014 and along with Vijaya Mallya he joins the ranks of another famous and flamboyant Indian billionaire who has recently either been arrested or issued an arrest warrant. Trouble started brewing for Roy and the Sahara group four years ago when India’s regulatory body, the Securities and Exchange Board of India or SEBI began investigating the company’s IPO initiative following a complaint. SEBI concluded that the Sahara Group did not have the authority to raise capital that bypassed India’s regulatory structure.
The Sahara story is part of a large unregulated shadow banking system that is believed to be worth $670 billion dollars in Asia, where India is the third largest economy.For the good part of the last four years Subrata Roy was able to have his way with SEBI by challenging them in India’s courts. The sluggishness of the Indian judicial system worked towards the advantage of the Sahara Group who continued to reassure investors with advertisements in newspapers and on T.V. despite the public caution notices issued by SEBI. The Supreme Court of India, which is India’s apex judicial body finally caught up with the Roy by not only upholding the SEBI verdict but also by issuing a directive to Sahara Group to refund the $3.9 it had raised from investors.
Following the court order, Sahara Group was to make refund payments in three installments with an additional interest rate of %15. After the first installment payment was made, the court issued a summons to Roy over the delays regarding the subsequent payments. It was after he failed to appear in court on February 26 2014 when a non bailable arrest warrant was issued and Subrata Roy was arrested, an event that will set forward an important legal precedent that will prove that no Indian billionaire is above the law.
By Unni K. Nair