Regulations
PACL which has raised Rs55,000 crores, seeks stay from Delhi HC against SEBI’s recovery order
PACL, despite its similar request pending before the Supreme Court, has approached the High Court seeking stay on SEBI's proceedings to recover the money
 
PACL Ltd, formerly known as Pearl Agrotech, has appealed to the Delhi High Court for a stay order against recovery proceedings initiated by market regulator Securities and Exchange Board of India’s (SEBI) against the company, says a report.
 
According to the report from CNBC TV18, the market regulator had maintained that since PACL's similar request is pending before the Supreme Court, there was no need for the company to approach the High Court. The next hearing of the case in Delhi HC is scheduled on 4th January, the report says. On the other hand, PACL told the HC that SEBI wants the money to be transferred to itself and the market regulator cannot act like an intermediately. 
 
Earlier, SEBI, as part of its recovery proceedings, attached all bank and demat accounts, mutual fund portfolios of PACL and it eight directors and promoters. In a release, SEBI said, the recovery proceedings have been initiated for their failure to comply with its order issued on 22 August 2014 directing, PACL and its directors and promoters to wind up the schemes, and refund Rs49,100 crore to the investors within three months from the date of the order. This amount is excluding further interest and all costs, charges and expenses incurred in the recovery proceedings.
 
According to SEBI, the amount due to investors of PACL would be over Rs55,000 crore. This  includes promised returns, further interest, all costs, charges and expenses incurred in respect of all the proceedings taken for recovery of Rs49,100 crore from PACL. 
 
The mobilisation of funds by PACL traces back prior to 1997. Upon receipt of a complaint, SEBI on 30 November 1999 and 10 December 1999 issued letters asking PACL to comply with the provisions of the collective investment scheme (CIS) Regulations. 
 
PACL challenged these letters before the High Court of Rajasthan in December 1999, claiming that its scheme does not fall under the definition of CIS as defined under the CIS Regulation and SEBI Act. PACL also challenged the constitutional validity of the CIS Regulations. 
 
The Rajasthan High Court on 28 November 2003, held that PACL's schemes were not CIS as defined under Section 11AA of the SEBI Act. The HC also quashed SEBI's letters issued to PACL. 
 
SEBI filed an appeal before the Supreme Court against the order of Rajasthan HC. The SC on 25 February 2013, while allowing the appeal upheld the constitutional validity of CIS Regulations, and directed SEBI to investigate the matter and take appropriate actions. 
 
After conducting an inquiry, SEBI on 22 August 2014, issued an order directing PACL, its promoters and directors to wind up all the existing CIS and refund the monies collected by the company to investors as per the terms of offer within a period of three months from the date of the Order. 
 
PACL filed an appeal before the Securities Appellate Tribunal (SAT), which was dismissed on 12 August 2015. The SAT directed PACL and its promoters-directors to refund the money within three months. Since the company and its promoters-directors failed to refund the money to the investors as per the directions of SEBI and SAT, the market regulator said it has initiated the recovery proceedings.
 
Meanwhile, All India PACL (Pearls) Investors Association (AIPIA)-led by Vishwas Utagi, has decided to to take out a massive morcha of around one lakh investors to SEBI and hand out claims of investors to the market regulator. 
 
AIPIA is also requesting investors to submit filled forms for claims at its offices. Here is the address of its Mumbai office... 
All India PACL (Pearls) Investors Association 
C/O Maharashtra State Bank Employees Federation, 
Dadyseth House, 1st Floor, (Rear), Nanabhai Lane, 
Fort, Mumbai- 400 023

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COMMENTS

PPM

1 year ago

I have a personal experience with the PACL agent in my native, which is almost near to Kannyakumari.

When the agent called me, he introduced himself as the agent of LIC and I accepted to meet him to discuss about the policy.

When we met, he told Pearl Agro is same as LIC and approved by GOI. I asked for the approval letter and the website of their company. The moment I asked for more details he started sweating and left me saying that he would come with his officer, but never happened.

One or two questions asked in time might have helped those who invested in PACL.

PPM

1 year ago

India is a true banana republic and the legal system will only work for the cheaters.

Vaibhav Dhoka

1 year ago

The failure of recovery is due to multiple agencies which do not co ordinate and have nothing to loose.Our courts are very much eager to grant INJUNCTION which keep the subject in abeyance.

Meenal Mamdani

1 year ago

This delay in rendering justice to the investors is abominable.

SEBI passed its first judgement against PACL in 1999.

This was challenged in Rajasthan HC by PACL at the end of 1999. Rajasthan HC too 5 years to deliver a judgement in favour of PACL in 2004.

SEBI appealed against this verdict in Supreme Court which gave a judgement in favor of SEBI after a gap of 10 years in 2014. PACL challenged this judgement before the SAT and mercifully SAT ruled against PACL in an unbelievably prompt manner, less than 1 year.

Now the investors are protesting before SEBI. Instead, they should be protesting before the Supreme Court for the unconscionable delay of 10 years to arrive at a judgement.

It looks like PACL counted on this delay by the SC, so that it could continue to use the investor funds for 10 years, as the other entities look positively prompt in comparison. SC may be the final court of appeal but if it cannot deliver judgement in a timely manner, should it even accept the case?

In USA, the SC accepts a fraction of the cases that come before it, depending on the implications of the case on the wider financial system. The rest are sent back to the lower body whose ruling stands.
Since this would take the case back to Rajasthan HC whose judgement the SEBI disagreed with, why could this case not go to SAT directly, short circuiting the inordinately long wait?

PACL comes out a winner in this case even if the final judgement has gone against it as it has had the use of investor funds for 16 years.

Is this justice?

REPLY

Binod Sarma

In Reply to Meenal Mamdani 1 year ago

Well said Meenal Mamdani .... True, people should go & have dharnas outside the supreme court for such inordinate delay .... Companies like PACL are using judiciary lacuna to delay proceedings & judgement.

Reliance Foundation to spread financial literacy among slum women
The Reliance Foundation on Monday announced a unique initiative it has taken up -- a project to spread financial literacy and awareness among half a million slum women of Mumbai.
 
The programme was launched on the 83rd birth anniversary of the late industrialist Dhirubhai Ambani and aims to "empower women towards making informed financial decisions and get them to inculcate the savings habit".
 
Backed by CRISIL's technical knowhow, the Reliance Foundation has carried out a study of Mumbai slums which revealed how women were usually kept out of the financial decision making process by the men.
 
"Even the employed ones among them hand over their salary to their husbands or fathers who manage the money. Psychologically, these women do not feel adept at handling finance. In reality, however, they are much better at managing finances though a majority of them know nothing about the basics of banking," a foundation official said.
 
Accordingly, a module has been created to educate such women in the basics of banking, help them avail of government initiatives like Jan Dhan Yojana, Rashtriya Swasthya Bima Yojana and Pradhan Mantri Suraksha Bima Yojana.
 
The Reliance Foundation will help every woman open a bank account under Jan Dhan Yojana and connect older women to the Atal Pension Yojana, said foundation COO Jitendra Kalra.
 
In the first phase, a pool of 50 master trainers will be trained from the marginalized women using technical help of CRISIL Foundation, who in turn would train another 2,400 trainers by March 2016 to carry the programme forward.
 
Kalra added the workshop is designed as an extension of Prime Minister Narendra Modi;s 'Beti Bachao, Beti Padhao' programme.
 
"By educating women from marginalised sections of the society on financial matters, we will be empowering them to make informed decisions for the financial well-being of their families. After all, a woman cares the most for her family," he noted.
 
Headed by founder-chairperson Nita Ambani, Reliance Foundation is engaged in helping marginalized sections of people and impacts over 5,500 villages and four million people by its activities.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article. 

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RBI's concerns on banking and economic stability
The RTP explicitly states that the performance of the Indian banking system remained subdued during the year due to a slowdown in the sector's balance-sheet growth
 
The RBI recently released two reports on the condition of banking and allied sectors in the India. The first is on trends and progress of banking sector in India 2014-15 (RTP) and the second is the financial stability report (FSR). Both offer interesting insights on the Indian economy.
 
The RTP explicitly states that the performance of the Indian banking system remained subdued during the year due to a slowdown in the sector's balance-sheet growth. The performance of public sector banks (PSBs) was sub-optimal compared to private sector banks (PVBs) as profitability and credit growth both declined. Along with this, in both the groups, the asset quality declined. The report also mentions policy environment changes like falling commodity prices and the strengthening US dollar. Amidst the policy environment challenges, the regulatory and policy responses during the year included initiatives for the de-stressing the banking sector, reforming and recapitalization of the PSB's, making banking more inclusive and the like. 
 
The FSR states that the corporate sector at present seems to be vulnerable and needs closer monitoring. This is in line with the view of the mid-year review of the finance ministry which states that of the four engines of growth - private consumption, public investment, private investment and exports - the first two are doing relatively better as compared to the last two. That private investment is not picking up can be explained by the fact that the corporate sector is under stress, and this is due to the leverage/ debt on their balance-sheets. The FSR mentions an analysis of a large sample of non-government, non-finance companies (NGNFs), roughly some 20,000 public limited companies and approximately some 255,000 private limited companies. In both these, leverage (debt to equity ratio) has gone up from 2011-12 to 2013-14. The interest coverage ratio (reflecting the debt servicing ability) has gone down for both the groups from 2011-12 to 2013-14. The profitability of the public sector companies has decreased while the profitability of private sector companies has marginally increased. An analysis of a smaller sample of 2711 NGNF's also yields another crucial insight about the sectoral composition and vulnerability. Sectorally, companies in the iron and steel and construction sector have both high leverage as well as interest burden. 
 
The FSR seems to be reflecting on the soundness and resilience of the financial system. The year raised several concerns. The March-September period saw a reduction in growth of both deposits and credit as well as deterioration of asset quality with an increase in the gross non-performing advances (GNPAs). Profitability of the scheduled commercial banks (SCBs) declined. The asset quality of both scheduled urban cooperative banks (SUCBs), as well as the non-banking finance companies (NBFCs), also deteriorated. The stress tests in these conditions on the banking front reveal that there is resilience, but it may become vulnerable amid deteriorating macroeconomic conditions. 
 
Fourth, a significant point in the FSR is on the perception of risk by experts that is captured in the systemic risk survey. At present, this framework has five broad groups - global risks, macro-economic risks, market risks, institutional risks and general risks. Compared to April 2015, the survey shows an increase in October 2015 in areas like the global slow down, sovereign risk/contagion and foreign exchange rate risk. These are now marked "high risk" in the report. The perception of some risk items have reduced over this time frame, and these include domestic inflation, current account deficit, household savings, regulatory risk and natural disaster risks. 
 
All this in the two reports point to the fact that a recovery is underway albeit sluggishly. The private sector and the banking sector, especially the public sector banks, seem to be inching towards stress. Over the next year, de-stressing the financial system and reducing the debt burden so that private investment happens will remain crucial challenges for Indian bankers and corporate honchos. How they fare only time will tell.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article. 

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COMMENTS

B. Yerram Raju

1 year ago

The RBI should have gone into the roots of the decline in the quality of lending. Banks in their embrace with technology ignored the human factor. Due diligence of clients has become a routine pastime and not an essentiality. Supervision over the agricultural and MSME advances is also a serious casualty in several Public sector banks. Development Banking has been consigned to the machines and orchestrated balance sheets. For every instruction machine is the answer. The staff at different hierarchical levels sing the song of technology. A day would come when answering a customer grievance has to be also paid for. Perhaps such payment would bring more accountability. At least the remedy for improper or irresponsible reply can be sought in Courts!!

MG Warrier

1 year ago

That the problems of Indian financial sector are much deeper and may need policy initiatives from GOI additional to usually debated regulatory reforms, implementing new bankruptcy code and further dilution of Centre’s stakes in public sector banks(PSBs) is being flagged in various reports published by the Reserve Bank of India. In this respect at least, India’s central bank is transparent and it is the media and other stakeholders including GOI who are ignoring strong signals given by RBI including in the latest Annual Report (Refer Governor’s Overview: RBI Annual Report 2014-15).
The revelation that ‘while the PSBs accounted for 72 per cent of total banking sector assets, they accounted for only 42 per cent in total profits during 2014-15, with the private sector banks(PVBs) surpassing the PSBs in the share of total banking sector profits’ may not surprise anyone who has been following the pressures on PSBs to do ‘directed’ business with management and HR-related constraints emanating from their government ownership. The same RBI report gives the reason for PSBs to remain in public ownership. That is the retarded growth prospects (remaining happy with less than 30 per cent share in India’s banking business) and unwillingness to penetrate to rural and semi-urban areas evinced by private sector banks. Reluctance to take risk and an eye on creamy layer of business distinguish private sector banks from PSBs in India.

The continuing deterioration in the asset quality of banks in general, and PSBs in particular, can be traced to inadequate attention paid to infusing professionalism at the top and consequent inefficiency from top to bottom.

As other institutions like cooperative banks and NBFCs are also not in better health, needful has to be done and done quickly to restore the health of scheduled commercial banks across private and public sectors. Government should own the responsibility to ensure necessary linkages for credit provided under ‘directed lending’ so that the asset created generate enough incremental income for repayment. Banks should be guided to improve pre-disbursement appraisal and monitoring of large-sized advances. For the purpose, banks will have to acquire sufficient in-house skills and the present trend of ‘outsourcing skills’ can be harmful in the long run.

M G Warrier, Mumbai

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