The corporatization and fraud According to the Association of Certified Fraud Examiners (ACFE), fraud is a deception or misrepresentation that an individual or entity makes by knowing that it can result in some unauthorized benefits to the individual or to the entity or some other party. In other words, mistakes are not fraud. Indeed, in fraud, groups of unscrupulous individuals manipulate, or influence the activities of a target business with the intention of making money, or obtaining goods through illegal or unfair means. Organizations of all types and sizes are subject to fraud. Fraud encompasses a wide-range of illicit practices and illegal acts involving intentional deception, or misrepresentation.Time line of the Sahara-Sebi caseNovember 2010:The Securities and Exchange Board of India or SEBI, bars Sahara India Group chief Subrata Roy and two companies from the Sahara stable - Sahara India Real Estate Corp and Sahara Housing Investment Corp - from raising money from the public. The two companies had raised several thousand crores through optionally fully convertible debentures. SEBI deemed the fund-raising illegal, to which Sahara responded with full-page advertisements in newspapers.December 2010:On an appeal by Sahara on December 1, the Lucknow bench of the Allahabad High Court orders the watchdog not to take any coercive action until an order is passed. January 2011:A Delhi court issues a bail able warrant against Sahara India Group's chairman Subrata Roy and four other officials of the group on a complaint that they duped investors in a proposed housing project of Rs.25,000 crore, holding there was enough prima facie material to proceed. February 2011:The Delhi High Court stays proceedings against Sahara India Group's chairman Subrata Roy and four other officials in a Delhi court on a complaint that they duped investors in a proposed housing project. May 2011:The Supreme Court directs Sahara India Real Estate to furnish the format of the application for anoptionally fully convertible debentures(OFCD) scheme and a list of accredited agents raising money on its behalf after the firm claimed it was not liable if investors provided false address and other details.June 2011: Sebi directs Sahara firms to immediately refund the money collected through sales of OFCDs with annual interest of 15 percent.October 2011:The Securities Appellate Tribunal (SAT) orders two unlisted Sahara Group companies to refund within six weeks about Rs 24,000 crore that they had raised through a controversial flotation of OFCDs three years ago. November 2011:The Sahara group moves the Supreme Court challenging the SATs order asking the company to refund the money raised through OFCD to investors within six weeks. November 2011:In a relief to Sahara group, the Supreme Court stays the SAT order directing its two companies to refund around Rs 17,400 crore to their investors and asked for the details of their assets and liabilities. January 2012:The SC gives Sahara Group companies three weeks time to choose between two courses to secure the investments made by the public in the OFCD scheme -- either to give sufficient bank guarantee or attach properties worth the amount.March 2011:Sahara India Real Estate Corp voices its grievance over a news channel reporting its proposal made to the Securities and Exchange Board of India on securing the money it mopped up from the market. May 2012:The Supreme Court is informed that the stock market regulator could not have taken up the issue of Sahara group of companies mopping up Rs.17,400 crore through debentures and ordered their refund. Senior counsel Fali Nariman, appearing for Sahara India Real Estate Corp, told the apex court bench of Justice K.S. Radhakrishnan and Justice J.S. Khehar that the Securities and Exchange Board of India (SEBI) took up the matter even though there was no complaint from any investor. June 2012:The SEBI tells the Supreme Court that the real estate arm of the Sahara group of companies had no right to mobilise Rs.27,000 crore from 30 million investors through debentures without complying with the regulatory regime. June 14, 2012:The Supreme Court reserves its verdict on a plea by Sahara group of companies, dealing in real estate and housing, challenging a tribunal's direction to repay money collected from investors through debentures. August 2012:The Supreme Court directs Sahara group's real estate company to return with a 15-percent interest the Rs.17,000 crore ($3.5 billion) it had mopped up as debentures from investors. October 2012:The Sahara group moved the Supreme Court, seeking the review of its Aug 31 verdict directing Sahara to return to investors Rs.17,400 crore with 15 percent interest that it had mopped up through Optionally Fully Convertible Debentures (OFCDs) in 2008 and 2009. October 19, 2012:The Supreme Court tells market regulator SEBI that it was free to initiate action against two real estate companies of the Sahara group if they fail to take steps for the refund of investors' money as directed by the apex court. November 2012:Sebi files a contempt petition against Sahara claiming it had not furnished the investor documents within the court stipulated time.The Sahara group in response moved the Securities Appellate Tribunal (SAT) in protest against market regulator Sebi's refusal to extend the deadline for the submission of documents relating to the bond flotations by two unlisted group firms. November 29, 2012:Gopal Subramaniam, senior counsel, appearing for the appellants (SIRECL and SHICL)argued in court that they were forced to approach the tribunal because of Sebi's refusal to accept the documents tendered by the Sahara entities. He also expressed the apprehension that a pay order of Rs 5,120 crore to repay the amount to the investors who subscribed to the optionally fully convertible debentures (OFCDs) would not be accepted by Sebi. There is no clarity on how the Sahara group had arrived at the sum of Rs 5,120 crore when the Supreme Court had directed it to refund Rs 17,400 crore along with 15 per cent interest. December 2012:Sahara Group moves the Supreme Court after SAT rejects its appeal against SEBI. The Supreme Court , however, lashed out at Sahara group's real estate companies saying their conduct was "shady" in the matter of returning the investors' money mopped up under optionally fully convertible debentures scheme. December 5, 2012:The Sahara Group gets a temporary reprieve from the SC.The Supreme Court directed the Sahara group to refund Rs 24,000 crore to its three crore investors in nine weeks amid stiff opposition from Sebi and depositors over staggered payments.The Supreme Court asked marketregulator SEBI to accept their pay order of Rs.5,120 crore as part payment of the investors' money they had collected through optionally fully-convertible debentures (OFCD). Sahara India Real Estate Corporation and Sahara Housing Investment Corporation - would deposit remaining amount in two installments. The court said that Sahara would deposit a sum of Rs.10,000 crore in the first week of January next year and the balance amount in the first week of February. January 2013:Sahara misses the repayment deadline set up by SC. The company fails to deposit the second installment amount with market regulator. It was required to submit Rs 10,000 crore by January first week.The Supreme Court also dismissed the Sahara group's plea for a review of its verdict directing two Sahara firms to refund around Rs 24,000 crore to their investors with 15 per cent interest. February 2013:The Supreme Court tells market regulator Sebi that it was free to freeze accounts and seize properties of Sahara group's two companies for defying court orders by not refunding Rs. 24,000 crore to investors. Market regulator Securities Exchange Board of India also cautioned investors and the general public against dealing with two Sahara group companies -- Sahara India Real Estate Corp and Sahara Housing Investment Corp -- and their promoters.Sebi later sought the arrest of Sahara Subrata Roy. April 2013:The Lucknow bench of the Allahabad High Court seeks a response from Sahara India and its chairman Subrata Roy on a PIL accusing them of denigrating SEBI through an advertisement in newspapers March 17.Sahara chief Subrata Roy, however responds that his group had repaid Rs 20,000 crore to its investors and it was the market regulator which was delaying repayments. He added that the Securities and Exchange Board of India (Sebi) should refund the balance Rs 5,000 crore already deposited with it to remaining investorsJuly 2013:Sebi files a contempt petition against Sahara in SC. Says company flouting SC direction to make refund. August 2013:The Securities and Exchange Board of India (SEBI) urges the Supreme Court to award maximum punishment to Sahara India's head Subrata Roy. October 2013:The Supreme Court directs the Sahara Group to give original title deeds of its assets worth Rs.20,000 crore to SEBI as a guarantee towards the payment of investors money. January 2014:The Supreme Court Tuesday turns down the plea by Sahara India group chief Subrata Roy to travel abroad to take care of his overseas business interests, saying that its nod was tied to the company showing that investors' money has been repaid.February 26 2014:The Supreme Court Wednesday issued a non-bailable warrant against Sahara group chief Subrata Roy for failing to appear before it in person as directed at the court's last hearing. Roy was also given till March 4 to comply with the court's order. February 28, 2014:Sahara India chief Subrata Roy surrenders before the police, a day after they failed to trace him to execute a Supreme Court warrant for his arrest

A brief history of Sahara scam and its legal highlights The chairman of Sahara India Pariwar, Mr.Subrata Roy has landed in a controversy in connection with Rs.24, 000-crore deposits, which his companies made from several millions investors without following directives of SEBI. Subsequently, SEBI filed a petition at Supreme Court of India regarding non compliance of formalities in collecting capitol from investors through optionally fully-convertible debentures. February 2014, the Supreme Court of India issued an arrest warrant against Mr.Subrata Roy, as he failed to appear in court in connection with the aforementioned case and it was filed by Securities and Exchange Board of India (SEBI). He was finally arrested by Uttar Pradesh policefollowing the arrest warrant of the Supreme Court. The bone of contention between Sahara and SEBI was that former has two additional firms under separate names and they are Sahara Housing Investment Corporation and Sahara India Real Estate Corporation. These two companies issued optionally fully-convertible debentures (OFCD) for collecting money from investors. As per SEBI rule, If OFCDs are issued, then the whole process must be completed within 10 working days but these firms of Sahara continued to collect money from investors more than two years and therefore, it found a total violation of SEBI rule regarding issuing of optionally fully-convertible debentures. The supreme court of India ruled out arguments of Sahara and ordered for refunding the amount collected from investors through optionally fully-convertible debentures with interests .The vindications of Sahara in connection with aforesaid case at Supreme Court, as follows. 1. These two companies not listed in any stock exchange of India and subsequently, their conducts are outside the jurisdiction of SEBI, which is regulator for listed firms only. 2. Therefore, our matter falls under Union Corporate Affairs Ministry and not under SEBI. The impact of Sahara scam and its magnitude It is important to analyse the social implication of Sahara scam based on the regulatory environment and of course, through investors point of view. The two firms of Sahara collected a huge amount of money from local investors through OFCD mode and they did not even maintain the records of the investors. Mr.Subrata Roy could raise capitol only because of his reputation among the people and he is having photographed with top politicians & top brass corporate leaders. Sahara conglomerate spreads across several portfolios of business including property, media entertainment, retail, and manufacturing, information technology, hospitality and sports. The lack of transparency in commercial dealing is one of the factors, which contributed for the successes of Sahara in a short period of time.Mr.Subrata Roy therefore deliberatively engaged in different business portfolios, which have weak corporate governance guidelines and regulatory environments, as well. The fact is that majority of investors of Sahara are villagers, who do not have a clear idea about the fraud associated with this model of business practice. It is imperative to mention that more than 23 million people have invested their cash in these two firms of Sahara and the amount of cash collected nearly Rs.24, 000 crores out of OFCD mode. There are reasons for rampanting such kinds of scams in India due to following reasons 1. According to Credit Rating Information Services of India Limited (CRISL), nearly 50 % of the Indian bottom line districts have just three banks per 100,000 of population andit thus paves the way for increasing Para-banking institutions in the country. The Para-banking institutions have more been exploiting people in several grounds ,since there is no clear provision or guideline. 2. Lack of the powers and jurisdictions among different enforcement agencies in regulating the conduct of business. For example, SEBI often has difficulty in dealing with scams of unlisted (in stock exchange) companies. SEBI has normally the powers to regulate the business of only listed companies in India and that was the vindication of Sahara at Supreme Court against SEBI. 3. Lag in court procedure regarding disposing cases, which normally take years and it promotes scams. Indian judicial system is overburdened by cases of corporate nature and it promotes more crimes in finical sector in particular and business in general. 4. Lack of clarity and transparency in the provisions, which regulate the conducts of business and for example, there is no clear cut provisions for regulating Para-banking institutions in India and therefore, it brings in to being financial irregularities in dealings.

The suggestions for improving the effectiveness of the corporate governance in India, as follows 1. Expand the jurisdiction of SEBI to control unlisted companies and their activities, since they constitute a large chuck of business in India. Normally SEBI has the power to control the behaviour of listed companies in India. It thus, needs to have more powers to control the nature of the business and protect the interest of share-holders, as well. 2. It is the responsibility of the government and its various nodal agencies to furnish every area of business with necessary provisions to ensure that it is working, according to the interest of the nation and different share-holders, at large. 3. Make necessary clarity and transparency in provisions dealing with regulating business towards the general objectives of the nation. 4. Establish necessary banking institutions in the rural parts of India and make awareness among the people about various banking products. In essence, a loin share of people in rural parts of India does not have bank accounts for want of sufficient number of ''Banking'' institutions. 5. Pre-emptive policies should put in place to keep away corporate-houses from political interventions, which enlarge the magnitude of corporate scams. It is clear that behind every corporate scam, there is an unscrupulous political nexus with corporate institutions. For example, both 2G spectrum scam and Saradha group financial scandal believed to have political patronage to an extent. 6. All the informal collective investment schemes must be brought under the jurisdiction of a centralised enforcement authority with necessary stipulations and moreover, discourage the unscrupulous investment schemes.

Conclusion Sahara scam is indeed an eye-opener in several respects about the dubious dealings in the interior corridors of corporate-houses and it brings in to being the need for protecting the interest "of" several million of investors, who invested their hard earned money in such fraud corporate institutions. SEBI proved to be effective machinery in tackling the scam (Sahara scam) to an extent but still it has a limitation of regulating unlisted companies in India. It is a fact that majority of investors of two institutions of Sahara were local people. The reasons for such scandals are several including lack of transparency, weak provisions, political nexus and ignorance of investors. Besides these, delay in disposing cases at courts is another reason for thriving scams in India. In the light of Sahara scam, it is the responsibility of the government and ''its'' various agencies to protect the interests of share-holders and nation 'as well' through putting in place necessary provisions in accordance with the changing requirement of market.

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