Sahara used OFCD money to buy hotel

The money raised by the Sahara Group from investors through its optionally fully convertible debentures (OFCDs), and which the Supreme Court had ordered to be returned with 15 per cent interest, may have been partly used to buy London's Grosvenor House hotel.

An investigation by The Economic Times, has revealed that a ''slice'' of the funds raised by Sahara India Real Estate Corporation (SIREC), one of the two companies asked to wind up and repay investors was deposited at the Lucknow branch of ING Vysya and the Khar (Mumbai) branch of the State Bank of India (SBI).

The money was then sent to Aamby Valley Ltd (again through a Lucknow branch of the Punjab National Bank) as an unsecured loan, which was subsequently converted to equity.

With a higher net worth of Rs6,058.9 crore as in March 2010 (after the loan conversion to equity), Aamby Valley was able to transmit the money to London via Mauritius without the Reserve Bank of India (RBI)'s vetting.

Under current regulations, companies are allowed an  investment of up to four times their net worth in a foreign company through the automatic route.

At this point Sebi discovered that massive amounts of money were being raised by two other companies, SIREC and Sahara Housing Investment Corporation (SHIC), through OFCDs camouflaged as private placements.

What this ET story proved according to analysts was that the Sahara Group was always one step ahead of the regulators, and some of its activities are, in fact, intended to evade regulatory vigilance.
 
Meanwhile, the Lucknow bench of the Allahabad High Court has given the officials of Employees' Provident Fund Organisation the go ahead to enter and search the premises of Sahara India group of companies in order to peruse the records to ascertain whether the group is sticking to the rules of EPF & Miscellaneous Provision Act, 1952.
 
The matter has been posted for 21 January seeking averments of compliance with respect to demands of documents as raised by organisational officials in their showcause notices.

The order has been issued by a division bench of justice Uma Nath Singh and justice VK Dixit on Sahara India's petition seeking quashing of notices, which requisitioned search and seizure of the premises on the pretext that its officials were not providing the documents to the inspectors of the organisation.