SAT upholds SEBI order against PACL in $9.5B investment scheme case

Securities Appellate Tribunal has upheld markets regulator Sebi's order against PACL Ltd, which was found to have garnered Rs 49,100 crore from public in the country's biggest ever 'sham collective investment scheme'.

Sebi, in August last year, ordered PACL to wind up its unauthorised collective investment scheme (CIS) and refund the money collected from investors within three months.

The company was running a land purchase scheme, where it was raising money from public to buy land. It was running a CIS without securing regulatory approval.

In the guise of selling agricultural land, PACL has 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, SAT order said.

However, PACL has so far issued sale deeds in respect of 19,284 investors. Further, the value of the total lands held by PACL in the form of stock in trade was Rs 11,707 crore.

Since the lands held by PACL are wholly disproportionate to the amounts collected from the customers and there is nothing on record to suggest that the company has any other assets, SAT noted.

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 a 92-page order, SAT said," Decision of Sebi that in the guise of running real estate business, PACL is running sham CIS which are detrimental to the interest of investors and consequently directing PACL to wind up the existing CIS and refund the money collected from the investors with promised return cannot be faulted." 

Further, PACL has been directed to comply "with directions contained in the impugned order of Sebi dated August 22, 2014 within a period of three months from today." 

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 Ltd have been involved with Pearls Group and PGF Group, among others.

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