Mumbai: Sahara Housing Investment Corp. Ltd and Sahara India Real Estate Corp. Ltd, two firms that are part of the diversified Sahara India Pariwar group, continue to raise money from the public, defying a ban on such activity by capital market regulator Securities and Exchange Board of India (Sebi).

The ban, originally clamped by Sebi in November, came into force on 7 April after the Allahabad high court vacated a stay on the order. In its defence, Sahara said it came to know of the order only four days later.

“We have issued instructions to stop. But keeping in mind the commitments made earlier, as the order came to our knowledge late on 11 April, and 11th and 12th being holidays we need to be given reasonable time," says a communication by Sahara’s official communication agency. “We do not intend anything in violation of the order of the honourable court. We are committed to honour the court’s verdict."

Media organizations, including Mint, had reported the high court’s verdict as soon as it was delivered.

A Mint investigation shows that agents across the country have continued to peddle a set of controversial debentures, commonly known as housing bonds and issued by the two Sahara entities, despite the ban. Several agents and investors in Uttar Pradesh (UP), Maharashtra and Gujarat said there has been no communication from the firms to stop their activities.

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“It will be an absolute contempt (of court)," said R.N. Trivedi, counsel for Sebi. “There is a restraint on any kind of money-raising by Sahara. If we get proof of this, we will initiate contempt proceedings."

Mint has reviewed at least three documents that establish money is being raised. Both firms have issued receipts to investors acknowledging their deposits after the stay was lifted.

On Wednesday, 13 April, Bhupendra Alopi, 38, an investor in Mumbai, bought Abode bonds issued by Sahara India Real Estate worth 5,000.

“I’ve paid Sahara India through cheque," he said. “The agent has promised me at least three times the money in the next 10 years."

Mint has reviewed a copy of the cheque issued in favour of Sahara India and a completed application form for the bond.

Another Surat-based investor, who did not want to be named, purchased five bonds worth 1,000 each on 11 April.

Receipt No. 189311313490 issued by Sahara Housing Investment and signed by Ashok K. Singh, branch head, Surat, offered a redemption value of 28,700 at the end of 15 years.

A copy of this receipt has been reviewed by Mint.

Alopi bought his bonds from R.B. Maurya, a Sahara agent based in the Mumbai suburb of Andheri, who says he has been selling Sahara products for the past several years. “I am in this (Sahara) since ’95. There has been no problem so far and the bonds are good. There is no problem between us and Sebi."

Maurya said he continues to accept money for bonds. “I submit the forms at my Andheri office and they issue the receipts. If you give cash, you get the receipts immediately. If you pay by cheque, the receipts will come to you in four-five days."

G.N. Dixit, an agent based in Gorakhpur, UP, said: “The company has not informed us to stop selling the bonds. We’re selling Nirman, Abode and Housing bonds—all three of them—even now. You should contact the company for more details."

Sudhir, another agent who did not give his second name, said: “Bilkul safe hain (they are absolutely safe). Even the Supreme Court has given us clearance. All you need is a photo identity and you can invest."

Sahara raised this money under three schemes—Abode Bonds, Nirman and Real Estate.

According to the agents, Nirman is a short-term bond, where one can invest for 18 months to four years. Abode is a medium-term bond maturing in 5-10 years, and the third bond is a long-term instrument, maturing in 10-15 years.

Agents across the country are not aware of any ban and continue to collect money for the Sahara group firms.

Sahara India Real Estate and Sahara Housing Investment have raised at least 4,843 crore by issuing optionally fully convertible debentures to investors as of June 2009, the date of their last annual report filed with the Registrar of Companies (RoC). Though the group is yet to report official numbers for subsequent years, the corpus has grown manifold, according to some estimates.

According to Sebi, the debentures are in violation of public issue norms laid down under the companies law and the Sebi Act. Sebi’s public issue regulations prescribe eligibility criteria for accessing public money, mandate due diligence of the company and its promoters by merchant bankers, grading by credit rating agencies, and vetting of the draft red herring prospectus by the regulator against rigorous disclosures norms. Sebi said none of its norms were followed in the debenture issue.

Anil Upadhyay, general secretary of Mumbai-based Investor and Consumer Guidance Society, said he is planning to move the Allahabad high court to make investors in these bonds a party to the case and freeze the money collected. “We’re working on moving court and demand for appointment of an administrator. A huge corpus of public money is at risk. What is the point of prosecuting if the money is siphoned out? I am afraid this has started already."

The society has also alleged that RoC, Kanpur, misled the Allahabad high Court in the case.

RoC had told the court that all investors in “private placement" are connected to the group and a written declaration to this effect has been taken.

In a letter to RoC, the investors body has said a number of bondholders it represents are not in any way connected to Sahara and that the group has not taken any declaration to the effect.

“We, the investors, wish to state that we have not given any declaration to the said company about...being connected to the Sahara India group," it said.

The investor group has written to the ministry of corporate affairs and RoC, asking them to clarify this in court.

M.P. Shah, RoC, UP and Uttarakhand, did not take calls on both his cellphones on Tuesday and Wednesday. Text messages also remained unanswered.

Abhijit Sarkar, Sahara spokesperson, contended there was a declaration as part of the application and denied allegations made by the investor group.

“Please note that declaration is given by all investors as per terms of application being signed by investors," he said in an email response.

He added if the declarations were not obtained, the firm has stipulated procedures for taking action against errant staff.

“If in any exceptional case some mistakes or error are found in application form, (this) is being rectified with the help of the worker at the service centre and the applicant investor. In absence of cooperation from (the) worker, (the) company takes serious action against worker... Where lapse is on part of investor, money tendered is liable to be refunded by account payee cheque in his name at his address mentioned in application form by head office," he said.

“Receipts and bonds are being issued by the company for whom applicant requested as per terms of application form. (The) forum has twisted the facts just to malign the image of the company for their vested motives," he said. “We shouldn’t encourage such groups; rather we welcome to redress any doubt in the mind of our...investor(s) to their satisfaction. We are ready to redress all genuine points of our investors."

The Sahara group’s business interests include finance, entertainment, real estate and media. Its Hindi-language newspaper competes in some markets with Hindustan, published by HT Media Ltd, which also publishes Mint.