The police has been asked to verify complaints from Mumbai-based investors against the Jaipur firm; firm denies any wrongdoing.
The Securities and Exchange Board of India (Sebi) has initiated investigations into alleged money raising by PACL India, a Jaipur-based real estate company, following complaints by some investors here.
The market regulator has asked the city police to verify the claims and file a first information report (FIR), if necessary, according to two people familiar with the development.
According to some reports, the group raised over Rs 20,000 crore by taking deposits from investors to book a plot of land. Investors alleged PACL India concealed vital information about its legal proceedings with Sebi. They’ve also separately filed complaints with the city police. A senior police official said, “We are investigating.”
The investors said they had been granted time to meet Sebi chairman U K Sinha on Friday.
In an emailed statement, the PACL spokesperson denied any complaints, saying: “The information seems to be misguided and incorrect, as PACL, a closely-held real estate company, and its business, are not regulated by Sebi. We are not aware of any such complaint and if any such complaints or inquiries arise, these will be dealt with at an appropriate forum.”
The company statement went on to add that since the matter was sub judice, they would discourage all speculative statements, which may have been made by business rivals.
“If any such complaint is filed before Sebi, we are hopeful that in consonance with the principles of natural justice, we will be given a proper opportunity of hearing, before any view is taken on the matter. We make all necessary disclosures to our investors as per the regulations applied to our business,” the statement added.
In a written response to the investors, Sebi said, “Neither PGF Ltd nor PACL India is registered with Sebi as a collective investment scheme (CIS). Vide order dated June 24, 2002, chairman, Sebi, held that the schemes floated by the company fell squarely within the definition of CIS and that, therefore, the company was required to comply with provisions of Sebi (CIS) Regulations, 1999.”
The company challenged the order in the Rajasthan high court, which ruled in the former’s favour. “The high court’s order has been challenged by Sebi before the Supreme Court of India, where the proceedings are still pending,” Sebi said.
PACL was originally incorporated as Gurwant Agrotech in 1996, a company selling magnetic pillows and other therapeutical products. It subsequently changed its name to Pearls Agrotech Corporation and PACL India. Between 1996 and 1998, Nirmal Singh Bhangoo was a director of the company. Bhangoo was also the chairman and managing director of Pearls Golden Forest Ltd (subsequently named PGF Ltd). PGF Ltd and PACL Ltd followed similar business models.
Both PACL and PGF were declared as CIS by Sebi and were directed to be registered under the relevant Sebi rules in 2002. Both companies contested the orders in the high courts of Rajasthan and Punjab, respectively.
While the former HC upheld the Sebi order against PGF, the Rajasthan High Court said the business of PACL did not come under CIS regulations of Sebi. Both orders were challenged at the apex court, where the proceedings are pending.
“Both companies have common directors, ownership is common and their modus operandi is similar. They are part of the same group,” said one of the complainants. Sebi has also argued to the SC, in connection with PGFL’s appeal, on the linkages between PGFL and PACL.
Last month, the Madhya Pradesh High Court ordered the closure of several companies raising money from investors through illegal schemes and refund of investors’ money. PACL India was one of them. The company said it’s contesting the case legally.