Saying PACL Ltd ran a collective investment scheme, mobilising about Rs 50,000 crore, the Securities and Exchange Board of India (Sebi) has asked the company to refund investors and wind up operations.
This is the biggest crackdown on a large-scale illicit money-pooling scheme. At Rs 49,100 crore, the amount concerned is twice that collected by the Sahara group, which is said to have mobilised Rs 24,000 crore.
Speaking to television channels, PACL officials said the company planned to move the Securities Appellate Tribunal against the Sebi order. They added the interests of investors would not be jeopardised.
The refund is to take place within three months, with a winding-up and repayment report to be submitted to Sebi within another 15 days, according to a 92-page order by Sebi whole-time member Prashant Saran.
The order said the company had mobilised Rs 44,736 crore till March 31, 2012, and another Rs 4,364.78 crore between February 26, 2013, and June 15 this year. "The total amount mobilised comes to a whopping Rs 49,100 crore. This figure could have been even more if PACL would have provided the details of the funds mobilised during the period between April 1, 2012, and February 25, 2013," it said.
In February this year, the Central Bureau of Investigation (CBI) had registered a case against the promoters of PACL and its sister firm PGF Ltd. This followed the agency conducting an inquiry, as directed by the Supreme Court, into allegations of collection of huge deposits from the public. "The inquiry resulted in a case against them and their associates for criminal conspiracy and cheating," a CBI spokesperson was quoted as saying at that time.
The company claimed it was in the business of purchasing and developing land, adding the developed land was transferred to investors, who could sell it for gains. The company is said to have paid commission of Rs 7,893.8 crore up to March 2012. It had 58.5 million customers, more than twice the 22 million demat accounts in the entire country. Of these, the company was yet to allot land to 46.3 million investors.
"It is difficult to believe a person in Uttar Pradesh will purchase 100-150 yards of agricultural land 2,000 km away. The lack of maintenance of proper records/data is a clear indication the activities of PACL are in the nature of a Ponzi scheme," the court said. Its order also noted out of a sample of 500 randomly selected customers, not a single one had received land, even after eight years. The company operated through a network of 250 associate companies to circumvent state laws on land ownership, the order said.
"PACL Ltd and its promoters and directors, including Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya, shall wind up all the existing collective investment schemes of the company and refund the monies collected under its schemes with returns due to its investors, according to the terms of offer, within a period of three months," it said. The company also has to give details of the trail of funds claimed to be refunded, the bank account statements indicating the refunds and acknowledgement receipts from the investors.
TRACING THE PATH
Mar 4, 1998: Sebi first writes to PACL about its schemes
Mar 23, 1998: PACL replies to the Sebi order, challenges its jurisdiction
May 26, 1999: Delhi High Court directs Sebi to appoint auditors for ascertaining the genuineness of PACL's transactions
Feb 22, 2000: Report highlights deficiencies/ discrepancies
Nov 16, 2000: Delhi High Court appoints K Swamidurai to physically verify genuineness of transactions
Jun 24, 2002: Sebi passes order, saying PACL schemes fall under CIS
Nov 28, 2003: High court of judicature for Rajasthan, Jaipur, says PACL schemes not CIS
Feb 26, 2013: Supreme Court sets aside high court order
Aug 22, 2014: Sebi passes order asking company to refund Rs 49,100 crore, with promised returns