Sahara India said on Thursday that it has initiated legal action against Mirach Capital Group (MCG) over the failure of talks concerning fund raising to pay the $1.6 billion bail amount required to secure the release of Sahara's chief Subrata Roy and two other senior executives.

The discussions revolved around a loan to be extended by Mirach with Sahara's boutique hotel assets of New York's The Plaza, Dream Downtown and London-based Grosvenor House as collateral. However, the talks collapsed acrimoniously, after Sahara alleged to have learnt that the bank letter confirming the funds in a Bank of America account was deemed a 'forgery'.

Sahara India Chief Subrato Roy
The Sahara group chairman Subrata Roy (C) with his face smeared in ink thrown by an unidentified man upon his arrival at the Supreme Court in New Delhi March 4, 2014. Roy, the self-styled managing worker of Sahara India Pariwar, India's biggest private-sector employer, will appear before the Supreme Court on Tuesday after spending the weekend in custody at a government nature-reserve guest house.Reuters

Sahara's statement read it was initiating civil and criminal charges against the US-based Mirach, over "gross criminal conduct."

The lawsuit will be filed both in India and the US.

On the other hand, MCG rejected Sahara's allegations and accused the Indian conglomerate of tarnishing its reputation through a "discredit and smear" campaign. It also said that it was preparing to file charges against Sahara, and that a statement would be released soon. 

Subrato Roy

Once known for hobnobbing with film stars and celebrities, Roy has now spent almost a year in the high security Tihar jail, after failing to appear before the Supreme Court and for the company's dispute with market regulator SEBI.

The Supreme Court set the bail amount at ₹10,000 crore, a record sum. Considering the bond scheme runs to $7 billion, it was in tandem with the gravity of people affected.

Saranch Sharma

In Sharma, Sahara found its knight. He had insisted on a plan under which he would lend about $1.6 billion and also invest a further $400 million in Sahara, with the hotel properties.

MCG has sent a letter to Sahara and its legal team, indicating that even as the refinancing deal has fallen through, it continues to evince interest in the hotel properties and would want a full buy-out. It also requested the Supreme Court to allow it to secure the properties.

Mirach said such a move would benefit Sahara's creditors, and asserted that it had access to the required funds.

Sahara, however, insisted that its investigations revealed that MCG did not have funds of its own, and was trying to put together a consortium of investors to fund the acquisition of the hotels.

"As such, the financial capabilities of MCG (Mirach Capital Group) and Mr. Sharma are doubtful," Sahara said.

The Supreme Court asked Sahara to submit a fresh plan for raising funds, on Wednesday. The funds raised would be used to repay Sahara's investors, said Reuters.

Sahara said it was working on such a deal to be able to comply with the court ruling.