Illegal fund mobilisation: PACL, 4 directors fined Rs 2,423 crore

The Securities and Exchange Board of India (Sebi) on Thursday imposed a fine of Rs 2,4230000000 on PACL Limited and its four directors for illegal fund mobilisation through various schemes that were used by the group to raise Rs 49,1000000000 from the public. The fine imposed by Sebi is one of the highest ever on any entity and individuals. According to the 47-page order passed by Sebi on Thursday, the regulator has imposed a monetary penalty on the company and its directors for violation of norms under Prevention of Fraudulent and Unfair Trade Practices Regulations. “Though this case deserves imposition of penalty of three times, however, as the interest of the investors is paramount, in exercise of the powers conferred upon me under Section 15- I (2) of the Sebi Act read with Rule 5 of the Rules, I am of the view that ends of justice will be met if monetary penalty at least equivalent to the amount mobilised illegally, as set out in para 19 (I) to (m), i.e., Rs 24,23,16,56,765 is imposed,” said the Sebi order. Sebi has directed PACL and its four directors — Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya — to jointly and severally deposit the penalty amount within 45 days. About three years ago, the regulator had told PACL to refund Rs 49,1000000000 to investors. PACL ran what the regulator considered as the biggest illegal money pooling scheme in the history of the country till its promoter Nirmal Singh Bhangoo was arrested by the CBI in January 2016 for alleged failure to refund over Rs 49,1000000000 collected from 5.850000000 investors over 15 years by offering investments linked to agricultural land and its development over a certain period of time. The company, which has had several run ins with the judicial system and the regulator in the last 15 years over its business model illegally accepted deposits from public through 67 different collective investment scheme (CIS). Now the refund process is being overseen by a Supreme Court-appointed committee, which has been able to collect “only a few hundred0000000”, Sebi said. Sebi said the magnitude of the violation can be assessed from the fact that huge illegal mobilisation of money was made leading to consequent profits to the tune of Rs 2,4230000000 in a short span of less than one year. The mobilisation of funds by PACL dates back to the 1990s. Following a complaint, Sebi had first issued letters in November-December 1999 to PACL, advising it to comply with the provisions of Sebi’s CIS Regulations. PACL then challenged the letters before the High Court of Rajasthan, claiming that its scheme does not fall under the definition of CIS. PACL had also challenged the Constitutional validity of the CIS Regulations. The Court in its 2003 order held that PACL’s schemes were not CIS as defined under Sebi rules and quashed Sebi’s directive. However, Sebi appealed before the SC, which in an order dated February 26, 2013 upheld the Constitutional validity of CIS Regulations, and directed Sebi to investigate the matter and take appropriate actions.