PACL had raised Rs 49,100 crore from nearly 5 crore investors that it needs to refund along with promised returns, interest payout and other charges, which take the total amount due to more than Rs 55,000 crore, Sebi said today. (AP)
In a major crackdown on PACL Ltd, capital markets regulator Sebi has attached all assets of the company and its nine promoters and directors for their failure to refund more than Rs 60,000 crore due to investors – the biggest illegal mobilisation of funds.
PACL had raised Rs 49,100 crore from nearly 5 crore investors that it needs to refund along with promised returns, interest payout and other charges, which take the total amount due to more than Rs 55,000 crore, Sebi said today.
Besides, PACL has another group firm PGFL which has “illegally mobilised more than Rs 5,000 crore and failed to refund the same in spite of directions of Sebi and SAT”, the regulator said while initiating the recovery proceedings.
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 said the recovery proceedings have been launched “for their failure to refund an amount of Rs 49,100 crores with return due to investors, along with further interest and all costs, charges and expenses incurred in the recovery proceedings”.
Sebi had asked them to refund the money in an order dated August 22, 2014. The defaulters were directed to wind up the schemes, and refund money to the investors within a period of three months from the date of the order.
Sebi said it has attached all bank and demat accounts and mutual funds folios of these defaulters with immediate effect and that has been communicated to all the banks, depositories and mutual fund houses.
The recovery notices were also sent to the defaulters, while all banks, financial institutions, depositories or any other persons holding assets of the defaulters have been advised not to part with the same and report the same to the Recovery Officer at Sebi office in the national capital.
The mobilisation of funds by PACL Ltd 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 the Sebi’s CIS Regulations dealing with Collective Investment Schemes.
PACL challenged the letters before the High Court of Rajasthan, claiming that its scheme does not fall under the definition of CIS. PACL had also challenged the constitutional validity of the CIS Regulations.
The Court in its order dated November 28, 2003, held that PACL’s schemes were not CIS as defined under Sebi rules and quashed Sebi’s directive to PACL.
However, Sebi appealed before the Supreme Court, which in an order dated February 26, 2013 upheld the constitutional validity of CIS Regulations, and directed Sebi to investigate the matter and take appropriate actions.
After conducting further inquiry, Sebi passed the order dated August 22, 2014, wherein, inter-alia, PACL Limited, its promoters and directors were directed to wind up all the existing CIS of PACL Limited and refund the monies returns which are due to its investors.
PACL had again approached the Securities Appellate Tribunal (SAT) against Sebi’s order of August last year. The Tribunal however dismissed the appeal on August 12 this year and directed the defaulters to refund the money within a period of three months.
PACL has filed an appeal against the SAT order as well before the Supreme Court, but the apex court has “not granted any stay either on SAT or Sebi’s order”, the regulator said.
“Since the defaulters failed to refund the money to the investors as per the directions of Sebi and SAT, Sebi has initiated the recovery proceedings,” the regulator added.
Sebi said PACL has illegally mobilised huge money from crores of investors across the country without obtaining registration.
“In spite of the directions, PACL has not taken any steps to refund money to the investors. Therefore, the defaulters are likely to conceal, remove or dispose of the whole or any part of movable assets namely money in the banks, securities in demat accounts, mutual fund investments and etc, which are liable to be attached in the proceedings.
“Consequently recovery proceedings may be delayed or obstructed by the defaulters,” Sebi said in its order.
The regulator also said there are a number of news reports that the investors across the country are raising voice against the defaulters for their failure to refund money, while “lot of complaints were received from general public regarding non-payment/non-refund by PACL”.
“There is a lot of hue and cry as number of investors are around 5 crores,” Sebi said while adding that “in order to protect the assets from any sort of alienation, it is necessary to attach the bank, demat and mutual fund accounts to prevent the defaulters from removing/concealing the same”.
The attachment includes lockers of the defaulters in single or joint names, Sebi said in its communication to the banks and other institutions, while adding that no debit would be allowed in their accounts although “credits, if any, into the account may be allowed”.
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