 "The logo of the Securities and Exchange Board of India (SEBI), India's market regulator, is seen on the facade of its head office building in Mumbai")
The Securities and Exchange Board of India (Sebi) on Monday began attachment proceedings against PACL Ltd (formerly Pearl Agrotech) to recover Rs 49,100 crore the company had raised from around 50 million investors through a collective investment scheme (CIS), which is illegal.
This surpasses the previous record, the Rs 24,000-crore recovery proceedings against the Sahara group of companies.
They money in question was collected over a long period for a land purchase project.
The principal amount involved is Rs 49,100 crore. Including the cost, interest, charges and expenses incurred due to the recovery proceedings, the amount due could be higher.
“Prima facie, the due amount seems to be more than Rs 55,000 crore,” said Sebi in the attachment order.
The proceedings have been initiated against PACL Ltd, as also its promoters and directors - Tarlochan Singh, Sukhdev Singh, Gurmeet Singh, Subrata Bhattacharya, Nirmal Singh Bhangoo, Tyger Joginder, Gurnam Singh, Anand Gurwant Singh and Uppal Devinder Kumar.
Sebi’s order covers all bank accounts, demat accounts and mutual fund folios of 10 entities.
“All banks, financial institutions, depositories or any other persons holding assets of the defaulters have been advised not to part with these,” Sebi's attachment order said. They have been asked to report the same to Sebi.
Last year, the market regulator had directed these 10 entities to refund Rs 49,100 crore to investors. Three months were given to comply. The matter went to the Securities Appellate Tribunal (SAT), which in August this year decided in favour of Sebi, giving PACL and the other entities another three months to comply with the order.
In October, Sebi slapped an additional penalty order against the company for Rs 7,269 crore.
Sebi in the attachment order also noted that a PACL group company called PGFL had mobilised funds illegally to the tune of Rs 5,000 crore. The company has “failed to refund the same in spite of directions from Sebi and SAT”, Sebi order added.
In June 2013, Sebi had issued show-cause notices to PACL, Bhangoo, and past and present directors.
In spite of the Sebi order in August last year, the company reportedly continued to mobilise funds and Sebi was in receipt of several complaints from investors on lack of refunds.
According to the market watchdog, a number of investors have raised their voices on lack of refund. Considering the number of investors is close to 50 million, the regulator had to act swiftly, Sebi said.
The mobilisation of funds by PACL traces back to 1990s. Upon receipt of a complaint, Sebi had first issued letters in November-December 1999 to PACL, advising it to comply with the provisions of Sebi's norms on CIS.
PACL challenged the letters before the high court of Rajasthan, claiming its scheme did not fall under the definition of CIS. PACL had also challenged the constitutional validity of the CIS Regulations.
The Court in November 2003, held PACL's schemes were not CIS as defined under Sebi rules and quashed Sebi's directive .
However, Sebi appealed before the Supreme Court, which in an order dated February 26, 2013, upheld the constitutional validity of the CIS Regulations, and directed Sebi to investigate the matter and take appropriate action.
After further inquiry, Sebi asked PACL, its promoters and directors to wind up all the existing CIS and refund the dues to investors.
“Since the defaulters failed to refund the money to the investors... Sebi has initiated the recovery proceedings," the regulator said.
| THE PACL CASE |
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