Has the Sahara group defaulted on its tax dues?

Who's telling the truth about the Sahara India group? The Government of India? Or the high-profile corporate group with interests in para banking, aviation, real estate and the media?

On November 29, during Question Hour in the Lok Sabha, Union Ministers of State for Finance and Company Affairs, Gingee N Ramachandran and Anandrao V Adsul, respectively, listed the names of the 20 top individuals and corporate bodies with income tax arrears totalling more than Rs 20,600 crore (Rs 206 billion) at the end of June 2002 and answered questions on the subject.

Among these defaulters were the following three companies in the Sahara India group -- with their income tax arrears:

• Sahara India Financial Corporation Limited -- Rs 3,192.54 crore (Rs 31.92 billion);
• Sahara India Mutual Benefit Company Limited – Rs 1,002.72 crore (Rs 10.02 billion); and
• Sahara Airlines -- Rs 383.58 crore (Rs 3.83 billion).

This is not the first time the names of these three companies have figured in the list of leading income tax defaulters.

On at least four occasions in the recent past, these three companies together with one more corporate entity, Sahara India (Firm) as well as the head of the group, Subrato Roy, who calls himself the 'managing worker' of the Sahara India Pariwar, have appeared among the names of income tax defaulters disclosed in Parliament.

For instance, on November 24, 2000, the name of Sahara India Financial Corporation was first in the list of the top 100 companies and individuals against whom income tax was due, Ramachandran stated.

On March 2, 2001, according to the same minister of state, the income tax dues of Sahara India Financial Corporation stood at Rs 830.92 crore (Rs 8.30 billion) on March 31, 2000.

The income tax dues of Sahara India Mutual Benefit Company were Rs 549.53 crore (Rs 5.49 billion) and those of Sahara India (Firm) were Rs 125.52 crore (Rs 1.25 billion) while Roy's personal income tax arrears stood at Rs 191.42 crore (Rs 1.91 billion).

The comparable figures for four group companies and Roy on December 31, 2001, were as follows:

• Sahara India Financial Corporation -- Rs 3,826.28 crore (Rs 38.26 billion);
• Sahara India Mutual Benefit Company -- Rs 1,199.73 crore (Rs 11.99 billion);
• Sahara India (Firm) -- Rs 542.31 crore (Rs 5.42 billion);
• Sahara Airlines -- Rs 397.98 (Rs 3.97 billion); and
• Subrato Roy -- Rs 190.09 crore (Rs 1.90 billion).

Once again, these figures were put out on April 14 this year by Minister of State for Finance, Gingee N Ramachandran, in reply to an unstarred question in the Lok Sabha.

Unlike in the past, the information disclosed in Parliament on November 29 elicited an unusual response from the Sahara India group.

This time round, the group issued advertisements on the front pages of a large number of newspapers.

Whereas the earlier references to the Sahara group's tax arrears were mentioned in passing in newspapers, on this occasion, by posting large advertisements, the group attracted a fair amount of attention to its financial affairs.

The advertisements were headlined 'Sahara's Income Tax Matter' and aimed at 'clarifying' what was supposed to be 'wrong and baseless informations' (sic) that had appeared in the media.

Curiously, nowhere in the advertisement was it stated that the media reports were based on information disclosed by a Union minister on the floor of Parliament.

The advertisement claimed that instead of defaulting on its income tax dues, the Sahara group was owed a considerable amount of money by the government in the form of 'refunds.'

Thus, according to the group, as on June 30 this year, the government had refunded Rs 30.99 crore (Rs 0.31 billion) to Sahara India Financial Corporation and Rs 15.55 crore (Rs 0.15 billion) to Sahara Airlines.

With respect to Sahara India Mutual Benefit Company, the advertisement acknowledged arrears of Rs 135 crore (Rs 1.35 billion) but added that the 'issue' had been 'covered' by an order of a Commissioner of Income Tax (Appeals).

The advertisement rhetorically asked: 'How can the Income Tax Department refund even a single rupee if there are any dues from Sahara (?)'

It argued that the tax authorities had been 'consistently creating demand' by treating 'deposits' as 'income.' The group claimed the Income Tax Department owed it more than Rs 625 crore (Rs 6.25 billion).

It is not clear whose claims are correct. Those by the Sahara India group in its advertisement? Or the minister's statement in Parliament?

What is curious is that the Sahara India group sought to insert advertisements to 'clarify' reports appearing in the media that were, in the first place, based on authenticated, public records -- namely, statements made in the Lok Sabha.

By apparently 'contradicting' statements made by a Union minister, has the group committed breach of parliamentary privilege? Should it not have 'clarified' its position to the concerned authorities at the finance ministry, namely, the Income Tax Department in the Central Board of Direct Taxes, instead of the media that merely reported what a minister had stated in Parliament?

The media is certainly not complaining. After all, which newspaper does not want large paid advertisements on its front page?

More than two years ago, on May 12, 2000, then minister of state for finance Balasaheb Vikhe-Patil had in reply to a question stated that registration of all non-banking financial companies and residuary non-banking companies had been made mandatory under Section 45 IA of the Reserve Bank of India Act.

The RBI had reported that out of five NBFCs in the Sahara India group, three -- Sahara India Financial Corporation, Sahara India Corporation and Sahara India Investment Corporation -- had been granted certificates of registration.

The applications for granting recognition certificates to Sahara India Limited and Sahara Investment India Limited had been kept pending by the RBI as these companies did not possess net owned funds of Rs 25 lakh (Rs 2.5 million) each (at that time).

It was further stated that two other group companies, Sahara India Kuri Limited and Sahara India Mutual Benefit Company, did not need certificates of registration from the RBI as these were a 'chit fund' and a 'notified nidhi' company, respectively.

The Sahara India group has a host of corporate entities in its fold and the structures of these firms are rather complicated.

The group recently bought for Rs 115 crore (Rs 1.15 billion) the shares of Batra Hospitality, the company that owns the Centaur Hotel opposite Mumbai's Santa Cruz airport. The hotel had been privatised a few months earlier for Rs 83 crore (Rs 830 million).

In the name of 'para banking,' a large number of corporate bodies belonging to Sahara India reportedly raise funds from the public -- including people residing in remote rural areas -- under various schemes.

Unlike many other non-banking finance companies and residuary non-banking companies that have gone under in recent years leaving depositors high and dry, the Sahara India group seems to be flying high.

One only hopes the group is not entangled in a slew of legal disputes with the income tax authorities.