PACL: Refunds up to Rs2,500 each paid to 1.13 lakh investors by Lodha Committee
Market regulator Securities and Exchange Board of India (SEBI) said the Justice RM Lodha Committee appointed by the Supreme Court has paid up to Rs2,500 each to 1,13,352 investors of PACL Ltd (erstwhile Pearls), who had filed the claims in prescribed forms.
 
In a release, SEBI said, "The Committee, in pursuance of its mandate started the process of receipt of claim applications, at the first instance, from investors having claims of not more than Rs2,500. The said process was open till 31 March 2018.
 
"...the Committee has started remitting refunds to investors after verification of the claim applications as received. Till date refunds in respect of 1,13,352 claim applications have been credited to the bank accounts provided by the investors in the claim applications,' it added.
 
Last month, the Australian Federal Court had accepted claim filed by SEBI on assets of PACL in that country. The Australian Federal Court also stated that as per three orders passed by Supreme Court of India, SEBI Act, SEBI Regulations, the Indian market regulator has full right, interest, power and authority to seek relief in Australia in the PACL case.
 
After observing that the money mobilised by PACL from investors was utilised for acquiring certain assets in Australia, as directed by Justice RM Lodha Committee, SEBI had filed a claim petition in the Federal Court of Australia seeking repatriation of the assets or the proceeds thereof on behalf of all the investors in PACL.
 
During September 2018, the Enforcement Directorate had filed a charge sheet against PACL (erstwhile Pearls) and its chief Nirmal Singh Bhangoo in connection with a Ponzi scam involving over Rs49,100 crore, which was collected allegedly by two companies from 5.5 crore investors.
 
Apart from Bhangoo, who is in judicial custody, his three colleagues and other persons have also been named in the ED chargesheet filed in a special court under the Prevention of Money Laundering Act (PMLA).
 
In 2016, a report from The Australian had exposed the Australian connection of PACL and Bhangoo. This was published by Moneylife (Read: PACL Scam: The Australian connection). The report said, in Australia, Bhangoo and several of his family members teamed up with Gold Coast property developers Paul Brinsmead and Peter Madrers. The two Australians had operated the company Resort Corp, which developed large tracts of coastal land in the Tweed Shire in northern NSW before its group of 14 companies collapsed in March 2009, owing about $300 million, it said. 
 
The ED, which started the probe after lodging an first information report (FIR) in 2015 based on the Central Bureau of Investigation (CBI)'s case, had in January attached Australia-based assets of the Pearls Group and Bhangoo worth Rs472 crore. 
 
On the refund claims from PACL investors, in January this year, SEBI has clarified that the refund may not necessarily be Rs2,500 per claimant investor, and would be effected on a pro-rata basis after considering the number of claims received as well as the funds available with the Justice Lodha Committee.
 
Earlier on 27 November 2016, the market regulator, while informing the process to claim refund (for investors of PACL) made it clear that the Committee would initiate refund process only upon realisation of a sizable amount. It had said, "In such case, investors would be required to file their claims only in the prescribed format upon specific notification by the Committee. Till such notification, investors are requested to retain their documents with themselves and not to part with them for any reason whatsoever."
 
The Lodha Committee is supervising the Supreme Court ordered process of selling PACL's assets across the country and refunding Rs49,100 crore collected from over 56 crore investors. The money to be refunded to the investors was allegedly collected by PACL and Pearls Golden Forest Limited - two companies belonging to Nirmal Singh Bhangoo-managed group - in the name of sale and development of agricultural land.
 
Lakhs of investors who put their hard earned money in PACL formerly Pearls Agrotech Corp Ltd, a collective investment scheme (CIS), have been in a panic about the fate of their investment after the company has been ordered to refund their money. It may be recalled that this company has raised a whopping Rs49,000 crore from people across the country, claiming to have bought them a stake in land, like a land mutual fund. PACL has also used India’s slow legal system very effectively to delay regulatory action for several years, while it continued to collect money from people. In fact, it has doubled the money raised, even after SEBI began action against it.
 
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PACL Scam: Australian Federal Court Accepts SEBI’s Claim
The Australian Federal Court had accepted claim filed by Securities and Exchange Board of India (SEBI) on assets of PACL Ltd (erstwhile Pearls) in that country. The Australian Federal Court also stated that as per three orders passed by Supreme Court of India, SEBI Act, SEBI Regulations, the Indian market regulator has full right, interest, power and authority to seek relief in Australia in the PACL case.
 
After observing that the money mobilised by PACL from investors was utilised for acquiring certain assets in Australia, as directed by Justice RM Lodha Committee, SEBI had filed a claim petition in the Federal Court of Australia seeking repatriation of the assets or the proceeds thereof on behalf of all the investors in PACL. 
 
In its order issued on 23 July 2018, the Federal Court appointed Steven Staatz as receiver for the Sanctuary Cover Properties. He is directed to pay, deposit or transfer balance of the Sanctuary Cove proceeds to the trust account of McCullough Robertson Lawyers.  
 
Last year, the Australian Court had directed to deposit balance of the monies in the trust account of McCullough Robertson Lawyers and any interest on these proceeds. On 27 January 2017, the trust account received A$87.37 million.  
 
The Federal Court also appointed Jane Clare McDonald as Referee for conducting an enquiry and assessment of the amount incurred by Sunanda Balkrishna Kadam, who on behalf of PACL investors had filed a class action suit there. Ms McDonald asked to contact SEBI or communications concerning SEBI securing the Fund in Australia, including preliminary research into SEBI’s entitlement to maintain a claim on behalf of Investors generally. As per the Court order, Ms McDonald, the referee was expected to submit her report by 17 September 2018.
 
Last week the Enforcement Directorate on Wednesday filed a charge sheet against PACL (erstwhile Pearls) and its chief Nirmal Singh Bhangoo in connection with a Ponzi scam involving over Rs49,100 crore, which was collected allegedly by two companies from 5.5 crore investors.
 
Apart from Bhangoo, who is in judicial custody, his three colleagues and other persons have also been named in the ED chargesheet filed in a special court under the Prevention of Money Laundering Act (PMLA).
 
The ED, which started the probe after lodging an first information report (FIR) in 2015 based on the Central Bureau of Investigation (CBI)'s case, had in January attached Australia-based assets of the Pearls Group and Bhangoo worth Rs472 crore. 
 
In 2016, a report from The Australian had exposed the Australian connection of PACL and Bhangoo. This was published by Moneylife (Read: PACL Scam: The Australian connection). The report said, in Australia, Bhangoo and several of his family members teamed up with Gold Coast property developers Paul Brinsmead and Peter Madrers. The two Australians had operated the company Resort Corp, which developed large tracts of coastal land in the Tweed Shire in northern NSW before its group of 14 companies collapsed in March 2009, owing about $300 million, it said. 
 
The CBI had arrested Bhangoo and his three colleagues in 2016 following allegations that they collected funds from investors in Delhi, Punjab, Haryana, Rajasthan and other states through ponzi schemes, in the name of real estate projects. 
 
In the same year, 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.
 
Earlier in July this year, market regulator SEBI had said that PACL had increased its offer to Rs23,000 from Rs20,000 to buy own properties. Due to this, the Justice RM Lodha Committee appointed by the Supreme Court had decided to invite final counter or revised proposals from interested parties. 
 
The Lodha Committee is supervising the Supreme Court ordered process of selling PACL's assets across the country and refunding Rs49,100 crore collected from over 56 crore investors.
 
Bhangoo, his companies PACL and Pearls Golden Forest Ltd (PGFL), as well as his lakhs of commission agents were accused of cheating 5.5 crore investors on the pretext of sale and development of agriculture land.
 
The companies made false allotments of land to investors. However, the companies never owned any land in their own name.
 
Bhangoo and his companies promised the investors that allotment would be done on their investment between 90 and 270 days and if not, handsome returns would be paid.
 
 The mobilisation of funds by PACL goes 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.
 
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Heera Gold Unravels: Hyderabad Victims Protest
Investors of the Heera Islamic Business Group, better known as Heera Gold, are coming out in the open to protest delayed payments following a financial crunch faced by this Ponzi company. Last week, over a 100 victims of Heera Gold held public protests in Hyderabad along with victims and investors from other parts of India.
 
The protests were led by Shahbaz Ahmed Khan, who told Moneylife that over 200 investor victims have filed complaint against Heera Gold and its founder Dr Aalima Shaikh Nowhera (Nowhera Shaikh).
 
“Every day, I am receiving calls from panicky victims of Heera Gold from across the country seeking my help in recovering their investment. There are many who had invested more than Rs1 crore in Heera Gold and are now facing difficulties. They are neither receiving interest nor getting the principal amount back.” Mr Khan claims “the Heera Group and Dr Shaikh have filed around 17 cases against me, including defamation. I heard that they have got an injunction from the City Civil Court against me to prevent me from posting messages to highlight plight of victims on Facebook and other platforms. However, I am filing a writ petition against the injunction.” 
 
 
He also alleges that due to the powerful political links of Dr Shaikh, the police are not investigating the matter or taking action against Heera Gold. He says, “Police are asking investors/victims of Heera Gold to go to the court claiming that this is a civil matter.”
 
However, a senior official from the crime branch, Hyderabad, who does not want to be named, refuted all the allegations made by Mr Khan about lack of investigation. He says, “So far, only one first information report (FIR) had been filed. That was also filed in 2012 and based on that we are investigating the matter. However, not many victims are coming forward to give any statement or evidence. Last week, there was one FIR registered at the Banjara Hills Police station and it is about to be transferred to the crime branch. Once we receive it, we will investigate the matter so as to take it to the right legal course.”
 
Mr Khan, however, presents another version. He claims that there are 200 investor victims, who are ready to record a statement before the police. “However, when somebody files a complaint, he or she is offered refund of their money by Dr Shaikh.” Mr Khan says that many victims are now ready to file a statement.
 
  
 
Earlier, in July this year, market regulator Securities and Exchange Board of India (SEBI) told Moneylife that activities of Heera Gold, are in the nature of Ponzi or multi-level marketing (MLM) scheme. 
 
Replying to an email sent by Moneylife with videos of panicky investors, the market regulator’s Hyderabad office wrote to say, "Upon examination into the matter, it was found that the activities of Heera Group are in the nature of Ponzi Scheme. Further, the nature of activities of Heera Group was also discussed in the meetings of State Level Co-ordination Committees (SLCC) of Andhra Pradesh and Telangana, which are headed by Chief Secretaries of the respective states. It was decided in the meetings of SLCC that the activities of Heera Group appear to be beyond the regulatory ambit of SEBI and RBI and the case would be taken up for investigation by relevant authorities such as CID-EOW, and Serious Frauds Office of India (SFIO). Accordingly, SEBI had already referred the case to CID-EOW, Enforcement Directorate, Commissioner of Police-Hyderabad."  
 
In August 2012, Asaduddin Owaisi, member of parliament (MP) from Hyderabad, had registered a case against Dr Shaikh for cheating a large number of local investors from his constituency. The Hyderabad Police are investigating this case.
 
On 10 September 2018, Farzanaunissa Mohammad Khaja filed an FIR under Section 406, 420 of Indian Penal Code (IPC) and section 5 of the Telangana Deposit of Financial Establishments Act, in Bajara Hills Police Station at Hyderabad. Ms Khaja has alleged in the FIR that her husband had invested Rs25 lakh in Heera Retail Hyderabad Pvt Ltd, but the company has refused to return her money. This FIR is most likely to be transferred to the Crime Branch for investigation.
 
   
 
This controversial and shadowy group has specifically targeted the Muslim community with the promise of high returns and constant references to ‘Allah’ to project itself as a devout and god-fearing organisation. The panic among investors over the past weeks is due to delays in making payments and a change in the payout dates.
 
In 2017, Dr Shaikh, CEO of Heera Gold formed the All India Mahila Empowerment Party under the banner of justice for humanity. This party even contested 221 out of the 225 seats in the recently concluded Karnataka Assembly elections with a 'diamond’ as its symbol. It is rumoured to have lost large sums of money. This and other rumours have triggered panic among people who want their money back.  
 
Investigations and information by a premier government agency, perused by Moneylife, claim that Heera Gold is involved in hawala activities. The note lists various actions against the group. For instance, on 17 May 2014, the Hyderabad Police apprehended six accused, while Heera Group promoter, Dr Shaikh was named an absconding accused. Subsequently, on 21 May 2014, the Enforcement Directorate (ED) searched Heera Group premises and seized documents pertaining to the illegal transfer of money through hawala.
 
The Heera group began its operations in 2010 and since then, claims to have created 25 legal entities. Of these, only 10 were found to be registered on Registrar of Companies (ROC), Hyderabad and only four are found to have filed their balance-sheets (FY12-13), which are being analysed. It is not registered under Foreign Contributions (Regulation) Act (FCRA), says a government source.
 
A large number of PAN, TIN and other state-level registration numbers are shown on its website and are under ED and State Police investigation. These 10 companies have two sisters as Directors, namely, Dr Shaikh and Mubarak Jahan Shaikh. The third director (in only three companies) is another woman named Khamar Jahan Shaikh.
 
The group claims to operate through over 19 companies in various business sectors, like gold trading, trading, textiles, jewellery, mineral water, granite, tours and travels, developers, electronics, Hajj and Umrah services among others. Heera Group claims to have its offices in Dubai, Saudi Arabia, Canada, China and Hong Kong. It markets itself as a trader in gold products and gold dust.
 
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COMMENTS

Liju Oommen

3 months ago

This is what happens when greed takes over. No due diligence is done and hard earned money handed over to crooks.

AIMIM Shahbaz Ahmed Khan

3 months ago

Why police not arresting her

Huzefa Kazi

3 months ago

Dear Editor, can you please elaborate as to what will be the correct legal recourse to be taken in case investors do not get their money back?

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