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News18 » Business
2-min read

Sahara defaults on loan taken by Bank of China, prompts legal action

Bank of China had financed Sahara's hotel buys for nearly $900 million.


Updated:March 3, 2015, 1:00 PM IST
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Sahara defaults on loan taken by Bank of China, prompts legal action
Bank of China had financed Sahara's hotel buys for nearly $900 million.

New Delhi: In yet another development which will compound trouble for Sahara group, Bank of China may initiate legal action against it for defaulting on a loan, sources said.

The sources also said Bank of China had financed Sahara's hotel buys for nearly $900 million. The development takes place even as US authorities are probing Mirach Capital for allegedly giving a forged bank letter to Sahara.

The Sahara group, whose assets stretch from Formula One to property and TV, is already in deep trouble with its chairman Subrata Roy languishing in Delhi jail since March 2014, after he failed to comply with a court order to repay investors in a bond programme that was ruled illegal.

The bail amount reflects the cost of the programme, estimated by Indian regulators to be as much as $7 billion.

Sahara has told the court it has paid most of the outstanding dues directly to the bondholders. India's markets regulator, which is seeking redress for millions of investors, disputes that.

Since Roy's imprisonment, Sahara has been trying to raise bail money using its properties, including New York's Plaza hotel and Grosvenor House in London.

Talks with U.S.-based Mirach Capital Group to raise $2 billion collapsed in February after it came to light that a bank letter underpinning a proposed deal was forged.

Sahara told the top court it was considering other proposals to raise funds, including selling a luxury development outside Pune, two hours from Mumbai.

It is unclear whether Sahara can stitch together another deal, and no potential bidders have emerged since the Mirach deal collapsed.

Sahara has been locked in a lengthy legal battle with Securities and Exchange Board of India (SEBI) over the bond programme and the regulator is seeking redress for millions of investors. Sahara says it has repaid most investors, a claim SEBI has disputed.

SEBI has already cancelled the portfolio management licence of Sahara's asset management division. It has said that Sahara Asset Management Company Private Ltd did not meet its "fit and proper" norms, due to the legal proceedings against some Sahara firms and officials, including founder Roy.

SEBI member S Raman wrote in his order cancelling the licence that allowing Sahara to run its portfolio management business could "cause prejudice to the interests of investors and the safety and integrity of the securities market".

The portfolio management business had assets under management of just Rs 7.7 million ($125,000) as of the end of last month, according to the SEBI order. The firm's mutual fund business, which runs under a separate SEBI license, managed Rs 1.47 billion as of the end of 2014, according to fund management industry body AMFI.

The high bail amount for Roy reflects the cost of the programme, estimated by regulators to be as much as $7 billion.

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