Sebi tells PACL to refund Rs 49,100 crore to investors

In the biggest-ever crackdown on large-scale illicit money pooling schemes and a case that dwarfs the clampdown on Sahara, market regulator Sebi has asked PACL (formerly Pearls Agrotech Corporation) to refund Rs 49,100 crore to investors within three months. Sebi has also ordered the immediate closure of unauthorized collective investment schemes (CIS) run by the company.

“The total amount mobilized comes to Rs 49,100 crore. This figure could have been even more if PACL had provided the details of the funds mobilized during the period of April 1, 2012 to February 25, 2013,” Sebi said in its 92-page order. PACL was quoted in agency reports saying it would approach the Securities Appellate Tribunal against the directive of the capital markets regulator.

“The collection of such huge funds suggests that PACL has many more customers than the stated 1.22 crore,” the market regulator said.
Referring to the proposal of PACL and its directors forwarded through their advocates, SEBI said that about 4.6 crore customers had not been allotted land.

“Thus, a quick calculation of the total number of the customers of PACL comes to around 5.85 crore which includes the customers who (are) said to have been allotted land and who are yet to be allotted the land,” Sebi said.

This is the biggest ever amount, as also the largest number of investors, involved in a case so far that has been dubbed unauthorized ‘collective investment schemes’ by Sebi. In contrast, Sahara had raised about Rs 25,000 crore through optionally fully convertible debentures, which has been ruled as illegal. More than 2.3 crore investors were involved in the Sahara case.

The capital markets regulator also said it is initiating further proceedings against the company and its nine promoters and directors for fraudulent and unfair trade practices and for violating Sebi’s CIS Regulations, among others, according to directions from the Supreme Court.

“PACL limited, in its submission to the Sebi bench had said that it is not running a CIS…The company has sufficient asset holdings vis-a-vis the money raised for its real estate business…the company would also like to remind its customers that it has always kept their interest paramount and would continue to do so,” PACL was quoted as saying in agency reports.

The case has been under the scanner of Sebi for more than 16 years. In a letter in March 1998, the market regulator had intimated PACL that it could neither launch any new schemes nor continue raising funds under its existing schemes. The company has however maintained that it was not running any illicit scheme and was in fact engaged in the business of sale and purchase of land.

Sebi, in its letter dated November 30, 1999, alleged that PACL was operating CIS, wherein the funds of the investors were pooled and utilized towards the cost of land, registration expenses, developmental charges and other incidental expenses. It advised the company to comply with and abide by the provisions of the CIS Regulations.

The case then went to the courts and the Supreme Court passed an order in February last year directing Sebi to determine whether the business of PACL fell within the purview of CIS or not. It asked the regulator to take further action in accordance with the law.