R Jagannathan

Firstpost.com

The Sahara Group, whose boss Subrata Roy has been in jail for the last 16 months for defying a Supreme Court's order of 2012, has claimed in court that it is impossible for any firm to cough up Rs 36,000 crore in 18 months. Roy's lawyer Kapil Sibal is quoted as saying: "No one in the world can pay Rs 36,000 crore in one-and-half years."

Under a Supreme Court order dated 31 August 2012, the Sahara Group was ordered to repay Rs 24,000-and-odd crore to investors of two group companies in three months. The money was raised illegally through optionally fulls convertible debentures (OFCDs).

Sahar didn't pay, claiming it had already returned the money to most of its investors before the court judgment. This shows that Sahara is eating its cake and having it too. If it could repay thousands of crores in less than 18 months in the 2011-12 period when the case was being heard, surely it can now repeat the feat under the specific orders of the Supreme Court?

Given this background, if Sahara now says that 18 months is too short a period, it is a travesty. The group has already had nearly three years to pay up, and if we take the 18 additional months now given by the court, it would add up to nearly four-and-a-half years. If we calculate the time from the date of the Sebi order of June 2011 asking Sahara to pay up, it means the group has had nearly five-and-a-half years to comply. The Rs 24,000 originally sought from Sahara has ballooned to over Rs 36,000 crore today due to accumulating interest. The larger bill is Sahara's own fault.

So Sibal is actually skating on thin ice when he claimed 18 months is not enough. What is self-evident is Subrata Roy's unwillingness to comply with the orders of the regulator and the highest court in the land.

This is not to deny that 18 months from now may not be enough to raise such a large sum, especially if most of it is tied up in illiquid real estate. But is it possible to deny that there has been no real intent to pay up?

The bench, headed by justice TS Thakur, who will be the next chief justice of India, should actually be willing to call the Sahara bluff.

Under the bail terms set for the release of Subrata Roy, he has to pay up Rs 5,000 crore in cash, and offer a bank guarantee of Rs 5,000 crore - making Rs 10,000 crore the price for his freedom. The rest of the money has to be paid in 18 months - which is what Roy's counsel is arguing against.

The way to call the bluff is simple: once Rs 10,000 crore is arranged, the Supreme Court should put the rest of Sahara's assets under a court-appointed liquidator, whose nod would be required for actually selling any property. Once the dues are recovered, the remaining property can be released to Roy.

This is probably what Roy fears most. Once all deals have to be routed through a court receiver/liquidator, no benami deals can be done. At the root of the Sahara group's operations are hidden investors - many of whom could be benami. This is probably the reason why Roy is possibly resisting the SC order. You can't sell something if it does not belong to you.

An interesting sale option was even talked about in the court hearing yesterday (7 July). One party wanted to buy one of Roy's properties for Rs 64 crore, but another party was willing to offer Rs 110 crore - leading the court to wonder if the property should be auctioned. The Sahara counsel opposed the idea vehemently.

This incident offers an insight into why Roy is resisting the sale. It could be because the Rs 110 crore was merely a spoiler bid, in which case Roy would be right to refuse. But there is another possibiility: if the property buyer is a current Sahara investor/benami party, it would make sense to sell to him at a discounted value so that he recoup some of his losses.

We can never know for sure. The Supreme Court's best option is thus to end the Sahara charade and put an official liquidator in place for the group to recover the dues. The SC has given Roy a long rope. Time to close the chapter.

The writer is editor-in-chief, digital and publishing, Network18 Group.