Rs 80,000 cr investor money at stake in ponzi clean-up

Tags: Companies

Regulator asks PACL to refund 5.8 cr investors in three months

Over Rs 80,000 crore worth of investments pooled in by crores of gullible investors are found to be entangled in numerous unauthorised collective investment schemes that market regulator Sebi has unearthed so far.

The biggest of them all was uncovered this Friday, when Sebi ordered the Delhi-based PACL — formerly Pearl Agrotech Corp — to immediately close its collective investment schemes and return the entire money to investors within three months. The scheme involving around Rs 49,000 crore dwarfs the Sahara case, in which Sebi has been trying to recover Rs 24,000 crore.

PACL’s is the biggest CIS case Sebi has cracked so far. Agency reports said PACL would challenge the Sebi order at the Securities Appellate Tribunal (SAT).

Apart from these two high-profile cases, Sebi has penalised over a dozen illegal collective investment schemes (CIS) in the recent past, including those of Pancard Club India, Sunplant Forgings, Nicer Green Housing Infrastructure and Wasnkar Wealth Management.

Sebi whole-time member Prashant Saran on Friday ordered winding up of all schemes of PACL and said the market regulator would initiate criminal and civil proceedings against the company’s promoters and directors for offences of fraud, cheating and criminal breach of trust and misappropriation of public fund.

PACL raised funds from public to invest in real estate assets, which include both agriculture and commercial land. It ran schemes that allowed investors to own land against deposits, while those who did not want land were promised returns ranging from 12 to 15 per cent.

A quick calculation showed PACL’s total customers at around 5.85 crore, the Sebi order said. They include those who are said to have been allotted land and those who are yet to get allotments. The 4.63 crore customers who have not been allotted land yet are estimated to have deposited Rs 29,420 crore with PACL.

In the case of the 1.22 crore customers who have been allotted land, no sale deed has been executed, the Sebi order said. The company has agricultural land worth Rs 11,706.96 crore and commercial land worth Rs 4,384.84 crore.

It is not clear whether the company has enough assets to settle the dues.

“By its own admission, PACL does not have enough land bank compared with the amount it mobilised from customers. I note that PACL had 4.63 crore customers as on March 31, who have not been allotted land. The outstanding dues to such customers as on March 31 stood at Rs 29,420.65 crore and the value of the total lands in the form of ‘stock–in-trade’ as on March 31 was Rs 11,706.96 crore. PACL does not have assets corresponding to the amounts of funds it raised from public,” the market regulator said.

JN Gupta former executive director of Sebi and founder of proxy advisory firm Stakeholders Empowerment Services, said it was a good order from the legal point of view and a step in the right direction.

“The recovery of assets will take time, and it is going to be a tough process. We are seeing that in the case of Sahara, where recovery has been slow. But the process has to start even if it takes years to recover investor funds,” Gupta said.

Parliament earlier this month approved a legislation giving Sebi more powers to regulate ponzi, multi-level marketing schemes and collective investment schemes (CIS) that dupe investors by promising high returns.

The regulator has also been given powers to search, seize and attach properties in connection with various capital market offences. While it was mandatory for all CIS schemes to register with Sebi, many such schemes have been floated around the country without such clearances and some of these have come to notice only after Sebi received complaints from investors who have lost money in those.

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