Mumbai, 23 September 2015
Mumbai – In its biggest ever fine, regulator Sebi today imposed a penalty of Rs 7,269.5 crore on PACL Ltd and its four directors for illegal and fraudulent mobilisation of funds from the public, saying the company deserves “maximum penalty” for such large-scale duping of the common man.
The penalty follows another order by Sebi last year wherein PACL was asked to refund Rs 49,100 crore it had collected through illicit schemes over a 15-year period.
The refund order was also upheld last month by the Securities Appellate Tribunal, where PACL had filed an appeal.
In its latest order today, Sebi said that PACL made huge illegal mobilisation of money, leading to consequent profit to the tune of over Rs 2,423 crore in a short span of less than one year.
In a strong-worded order, Sebi said, “Keeping in view the entire facts and circumstances of the case… there can not be a better case than this which deserves the maximum penalty”.
Seeking to send a strong message to the securities market at large that such violations would not be viewed lightly, Sebi said, “In the recent past, the country has suffered a lot in the hands of entities who indulge in such illegal money mobilisation under various schemes, wherein hard earned money of the common man has been duped”.
“Thus, imposition of deterrent penalty is the need of the hour,” Sebi said, while adding that its Prevention of Fraudulent and Unfair Trade Practices Regulations provide for “severe to severe penalties” for dealing with such violations.
Under Sebi norms, it can impose a penalty of Rs 25 crore or three times of the profit made by indulging in fraudulent and unfair trade practices and in the present case the regulator has imposed a fine equivalent to three times of the illicit gains.
Sebi said that its probe revealed that PACL and its four directors — Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya — had mobilised funds from the general public through illicit collective investment schemes including in the name of purchase and development of agriculture land.
PACL and its directors have been told pay the amount to Sebi within 45 days.
The company was running a land purchase scheme, where it was raising money from public to buy land. In the guise of selling agricultural land, it collected Rs 49,100 crore from 5.85 crore customers over a period of 15 years by promising them that the investments in the schemes of the company are highly profitable.
This is the biggest-ever amount, as also the largest number of investors, so far involved in a case found to be running illegal money pooling scheme.
In August last year, Sebi had ordered the immediate closure of unauthorised collective investment schemes run by PACL and refund investors’ money within three months.
Besides, the capital markets regulator had said it was initiating further proceedings against the company and its directors for fraudulent and unfair trade practices, as also for violation of Sebi’s CIS Regulations, among others, as per a direction from the Supreme Court.
While the company maintained that it was not running any illicit scheme and was in fact engaged in the business of sale and purchase of land.
Sebi first issued a notice in November, 1999, to PACL, alleging that it “was operating CIS, wherein the funds of the investors were pooled and utilised towards the cost of land, registration expenses, developmental charges and other incidental expenses.”
The case later went to courts, while the Supreme Court passed an order in February 2013, directing Sebi to determine whether the business of PACL fell within the purview of CIS or not, and accordingly take further action in accordance with the law.
Promoters and directors of PACL have been involved with the Pearls group and the PGF group, among others.
Following Sebi’s order, PACL had approached Securities Appellate Tribunal. The tribunal, last month, upheld the markets regulator’s order against the company.
Further, PACL was directed to comply “with directions contained in the impugned order of Sebi dated August 22, 2014 within a period of three months.”