This happened after the Reserve Bank of India(RBI) ordered the group to shut-down its para-banking operations through which it used to raise money to fund its capital intensive businesses from real estate to an airline.

The Rs 24,000 crore question for the Sahara group is where did it get the money to repay investors who had invested in its housing bonds or the optionally fully convertible debentures(OFCDs)? The group had raised this money through Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL).

This happened after the Reserve Bank of India(RBI) ordered the group to shut-down its para-banking operations through which it used to raise money to fund its capital intensive businesses from real estate to an airline.

To get around the RBI directive, the Sahara group started issuing housing bonds through SIRECL and SHICL. These bonds were technically referred to as OFCDs. The Sahara group noted that these bonds were being issued to "friends, associates, group companies, workers/ employees and other individuals associated/affiliated or connected in any manner with Sahara India Group of Companies."

On this pretext, the group felt that issuance of these OFCDs did not amount to a public issue. As per Section 67 of the Companies Act, 1956, an offer of shares or debentures made to 50 persons or more is construed to be a public offer. It is estimated that the Sahara group sold the housing bonds or OFCDs to around 2.96 crore investors and raised over Rs 24,000 crore.

Hence, the issuance of OFCDs was a public issue and given that, it needed to be listed on a stock exchange, which it wasn't. The Securities and Exchange Board of India (Sebi) came calling and KM Abraham, who was a whole-time member of Sebi, issued an order dated 23 June 2011, in which he asked Sahara to "refund the money collected by the aforesaid companies[i.e. SIRECL and SHCL]...to the subscribers of such Optionally Fully Convertible Debentures with interest of 15 percent per annum from the date of receipt of money till the date of such repayment."

In the order Abraham also contested how Sahara could raise such a huge amount of money only through members associated with the Sahara group.

"The case of the two Companies is that they have issued OFCDs only to members associated with the Sahara group...Even the listed company with the biggest market capitalisation and the largest investor base in India has only under 4 million investors. In fact, the total investor base in India currently (reckoned on the basis of unique depository accounts in the two Depositories taken together) is only of the order of 15 million," he wrote.

Given this, how did Sahara manage to issue bonds to 2.96 crore investors, who were largely members associated with the group?

This Sebi order was challenged in court by Sahara. It led to a series of events, which finally led to the Supreme Court judgement on 31 August 2012. The apex court in the country basically stood by Sebi's decision and asked Sahara to refund Rs 24,029 crore that it had raised through OFCDs, to the investors by November 2012.

The Supreme Court directed the Sahara group to hand over the money to Sebi, which would in turn refund the money to the investors. The group was soon given more time to repay the money, and further directed to deposit Rs 5,120 crore immediately. This the group paid up on 5 December 2012 and hasn't paid up anything since then.

Sahara has since contested that it has already paid its investors and handing over the money to Sebi would mean double payment. The group claims that it refunded Rs 16,177 crore to investors in May and June 2012. In fact, the Business Standard had reported in November 2012, that the agents of the Sahara Group were being pushed to collect sehmat patras (consent letters) from investors to show that their money had already been returned to them.

"Agents, estimated to be a million strong, who sold OFCDs, often termed housing bonds, have been ordered to collect these letters, failing which their commissions are being stopped. With these consent letters, many of which are pre-dated, with dates ranging from as early as April to show that refunds were spread over a long period, documents such as account statements and passbooks in the hands of the customers are being collected," the newspaper reported.

This happened after the Supreme Court judgement asking Sahara to hand over Rs 24,000 crore to Sebi. If the group was refunding the investors as early as April 2012, why was it fighting a case in the Supreme Court at the same time?

Further, where did the group get the money from? Rs 24,000 crore is clearly not small change. Interestingly, the group has offered an explanation for this.

The group claims that the Sahara India Cooperative Credit Society and Sahara Q Shop bought the real estate assets worth thousands of crores from SIRECL and SHICL, the companies which had issued the OFCDs. This money was then used to repay the investors who had invested in the OFCDs.

But where did Sahara India Cooperative Credit Society and Sahara Q Shop get the money to buy the real estate assets of SIRECL and SHICL? The group claims to have raised this money through the Sahara India partnership firm which raised money on behalf of Sahara India Cooperative Credit Society and Sahara Q Shop, across 4,700 locations throughout the country.

The group essentially put its vast network of branches to work, it claims.

The next question is, what was the pretext on which Sahara India Cooperative Credit Society and Sahara Q Shop raised money?

Sahara Q Shop could have raised money as an advance against the promise of providing consumer goods to investors who invested in it. The Sahara Q Shop had got immense credibility in small town India, given that it was being advertised by the Indian cricket team.

On the face of it Q Shop seems like a money raising scheme that is being marketed as a retail venture. In fact, in an affidavit filed with the Allahabad High Court, Sebi has alleged that the group was "forcibly and unilaterally converting the investments in Sahara India Real Estate and Sahara Housing Invest to Sahara Q Shop without any consent of the investor, in defiance of the orders of the Supreme Court."

The question also is why the Sahara Q Shop venture should not qualify as a collective investment scheme.

A collective investment scheme is defined as "Any scheme or arrangement made or offered by any company under which the contributions, or payments made by the investors, are pooled and utilised with a view to receive profits, income, produce or property, and is managed on behalf of the investors is a CIS(collective investment scheme). Investors do not have day to day control over the management and operation of such scheme or arrangement." And this should bring the Sahara Q Shop under the regulatory ambit of Sebi.

Interestingly, the Sahara Q Shop seems to have also invested in the troubled National Spot Exchange. As the Business Standard reports, "Recent data put out by the troubled National Spot Exchange (NSEL) showed that Sahara Q Shop had invested a little over Rs 220 crore through Indian Bullion Markets Association, a subsidiary of NSEL."

What all this tells us is that Sahara continues to be a para-banking operation on the ground.