The Enforcement Directorate on Wednesday filed a charge sheet against PACL Ltd (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, Securities and Exchange Board of India (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.
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.
Updated on 1 August 2018 to add clarifiction submitted by the company to stock exchanges.
The directors and promoters of BK Birla group company Kesoram Industries have allegedly indulged in large-scale insider trading in the process short-changing minority shareholders hundreds of crores. The trail of such wrongdoing was recently alleged by a shareholder Janardan Kothari at the annual general meeting (AGM) of Kesoram Industries on 13 July 2018. Moneylife has reviewed the documents shared by Mr Kothari and pieced together the alleged modus operandi of this episode. The company’s stand at the AGM was that, “We will not take the question of related party and that it can be discussed separately”.
As of 31 March 2015, Kesoram held 27.46 lakh shares of Century Textiles. On 22 March 2016, Kesoram sold all these shares to Camden Industries for Rs141 crore in a bulk deal. In FY17-18, Kesoram invested another Rs400 crore in Cygnet Industries, its wholly owned subsidiary. Cygnet Industries used this amount to buyback 27.46 lakh shares of Century Textiles from Camden Industries in three transactions on 5th, 11th and 12 December 2017; for Rs355 crore. Thus, it is alleged that Camden Industries made a clean profit of Rs214 crore.
Then Cygnet Industries sold these 27.46 lakh shares of Century Textiles to Pilani Investments, a promoter entity of Kesoram, in two transactions on 7th and 14 June 2018, for Rs255 crore and in the process realised an allegedly loss of Rs100 crore.
In this entire round tripping, Camden Industries allegedly made a profit of Rs214 crore but Kesoram shareholders lost Rs100 crore through Cygnet Industries. Also during FY15-16, Kesoram had through a slump sale, sold its spun pipes and chemical business to Camden Industries for Rs400 crore. These businesses were again bought back by Kesoram in FY17-18 for Rs422 crore.
The important question that arises is who is the owner of Camden Industries? Camden Industries neither is a subsidiary of Kesoram nor it is a promoter entity of Kesoram. But so many critical sale and repurchase transactions are taking place regularly between Kesoram and Camden Industries. At the annual general meeting (see video) Mr Tridib Kumar Das (CFO of Kesoram Industries) said that, “There position is that it is not a related party”.
However, little digging throws up many interesting connections. Camden Industries was incorporated in 2015 and its registered office was on the second floor of Birla Building in Kolkata. Further, following details were found on the website of MCA and Zubacorp.com. Camden’s directors include:
1. Suparna Hingorani:
a) Director in Vidula Chemical, in which Kesoram holds 44,750 shares and has a common director with Cygnet Industries- Deepak Kumar Sharma.
b) Director in Precious Services Consultancy; which has two common directors with Cygnet Industries- Gautam Ganguli, the company secretory of Kesoram and Sharmila Nath. Precious Services Consultancy has its registered office in Birla Building.
c) Director in SNP Investment & Trading; which has a common director with Cygnet Industries- Deepak Kumar Sharma. It also has its registered office in Birla Building.
2. Keshav Chhetri: Also a director in Vidula Chemical.
3. Debashis Biswas:
a) Director in MSK Travels; which is a related party of Kesoram.
b) Director in Kundra Investments; which has its registered office in Birla Building.
Incidentally, the email ID of Manav Investment and Trading, promoter entity of Kesoram is shared by Kundra Investment, Precious Consultancy and SNP Investment. Sharing the same email suggests that the four supposedly unrelated companies may be linked and related with each other.
There in enough circumstantial evidence to point out, as to who is the ultimate beneficiary owner of Camden Industries. On paper, Camden’s entire equity capital is owned by its employees and directors. Moneylife found out that the entire shareholding is owned by seven persons; with six people owning 14% each and remaining 16% owned by the seventh person, just enough to satisfy the minimum number of shareholders required to form a public company.
The clinching evidence as discovered by Mr Kothari to finally prove that Camden, Kesoram and Manav Investment are all related is:
1. The board resolution dated 17 December 2015 of Camden Industries has authorised Mr Das (CFO of Kesoram Industries) and Gautam Ganguli (Company Secretary of Kesoram) to finalise and execute agreements on behalf of Camden Industries. This proves that Kesoram Industries and Camden are related because Kesoram’s key managerial personnel are authorised to act on behalf of Camden Industries.
2. Manav Investment through its board resolution on 7 March 2016 had provided corporate guarantee and pledged its investments to IndusInd Bank in connection with a term loan of upto Rs400 crore being availed by Camden Industries.
3. In the Director’s Report section of Manav Investment’s Annual Report for FY15-16, it is clearly mentioned that the company has made given a guarantee to IndusInd bank for Rs200 crore against Camden Industries.
4. Camden Industries in its prospectus for private placement offer on 21 March 2016 for bonds worth Rs430 crore has mentioned that the payment of obligations will be secured by the first ranking exclusive mortgage of immovable property of Kesoram Textile Mills, promoted by Kesoram Industries. The same was again stated in prospectus dated 16 March 2017 for private placement offer of bonds worth Rs340 crore.
5. Kesoram Textile Mills in its annual report for FY16-17 has mentioned under the heading of contingent liabilities that it has provided guarantees, securing non-convertible debentures (NCDs) of Camden Industries by mortgage of its land in Kolkata.
This clearly shows that Kesoram Industries, Manav Investment & Trading and Camden Industries are related parties. It is also clear that Camden Industries has made huge illegal profits at the expense of Kesoram’s minority shareholders.
Further, Mr Kothari has alleged that similar transactions have taken place around the same dates in shares of Hindalco, Grasim, Ultratech Cement, and Century Enka and only a detailed audit can reveal about profits made by Camden Industries at the cost of minority shareholders of Kesoram Industries.
“SEBI should investigate the violation of the insider trading norms by the directors and promoters of Kesoram Industries to protect the integrity of the Indian capital markets and to save the minority shareholders of Kesoram Industries. The role of Deloitte Haskins & Sells, the auditor of the company also needs to be thoroughly examined by the regulators to determine whether their supposedly ‘true and fair view’ and opinion was independent of influence of the management and promoters or was there any collusion?” Mr Kothari says.
We sent an email to senior officials of Kesoram Industries seeking their comment on these issues. We will update this article with their comment as and when we receive it.
After we wrote this article, NSE & BSE in a notification dated 16th July, had sought clarifications from the company on the allegations made by. The company submitted its response to the exchanges on 25 July 2018 (https://bit.ly/2LOfbwb), in which they mentioned the following key points:
1. The promoter group in last five years alone has infused around Rs665 crore in the company through right issues and preferential allotments. And thus they have not short-changed the minority shareholders.
2. Over 2012-2018, the company had suffered losses of Rs3,200 crore and had accumulated huge debt, and in order to save the company from becoming sick, the management had to monetise assets. They did this by selling their spun pipes and chemical business, and also liquidating a part of investment portfolio (Century Textiles). These transactions where carried out at prevailing market prices and in accordance with SEBI regulations.
3. Camden Industries is not a "related party" of the company in terms of provisions of the Companies Act 2013 and SEBI Regulations 2015.
4. In December 2017, the company's debt had declined and the financial position of the company had stabilised. Thus the company decided to reacquire its business divisions and investment portfolio from Camden and the same was done at prevailing market prices.
Investors of Heera Islamic Business Group, better known as Heera Gold, are in a panic over payment delays and rumours about financial difficulties faced by the group, which has amassed vast sums of money by specifically targeting the Muslim community by invoking the name of “Allah” in its sales pitch. The trigger for people gathering to protest at Heera Gold’s plush offices in Bengaluru, Hyderabad and other cities is the decision to 'share profit' once in three months instead of every month. But that is not the only issue.
Videos sent to us show that officials at Heera Gold's corporate office at Hyderabad refused to meet people and had locked the office from outside while staying inside. The controversial group is under investigation by the Enforcement Department and the Serious Frauds Office of India (SFIO) for several years, but the community continued to be lured by the high monthly returns offered by its Ponzi-like business.
Interestingly, the group is headed by Dr Aalima Shaikh Nowhera (Nowhera Shaik), Chief Executive of Heera Group, who investors say is no longer in India. Typical of Ponzi operations that are in trouble, she has released a video to allay fears of investors and run down critics and those who are panicking at the payment delays. Source say that its immediate financial troubles follow its foray into politics. In 2017, Dr Shaik, 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 has triggered panic among people who want their money back.
Heera Group claims to be a gold trading company with business all over the world. In the past four years, the lack of any enforcement action by investigation agencies has allowed it to grow rapidly and diversify into diverse business. In the past two years Moneylife has raised the issue of Heera Gold's Ponzi operations with two SEBI Chairman — Mr UK Sinha as well as Mr Ajay Tyagi — because it operated like a vast collective investment scheme. Neither of the two SEBI chairmen bothered to respond. Our communication we said, "We hope SEBI will take note of this and hasten action so that people do not end up losing money. Many women too are being conned into borrowing against property to invest in these companies on the claim that the returns would be significantly higher than the interest they would pay on their loans."
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 Shaik 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.
Earlier, in August 2012, Asaduddin Owaisi, Member of Parliament (MP) from Hyderabad, had reportedly registered a case against Dr Shaik for cheating a large number of local investors from his constituency.
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 Balance Sheets (FY2012-13), which are being analysed. It is not registered under 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 Shaik and Mubarak Jahan Shaik. 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, textile, 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.
Few days ago, several investors from Hyderabad, Mumbai, Pune, Aurangabad from Maharashtra and Karnataka reached Heera Gold's central office at Hyderabad. They wanted to know why there was change in the payout scheme. However, instead of responding to issues raised by investors, the staff at Heera Gold closed office doors from inside.
Galli News from Hyderabad have also raised several questions on Heera Gold change in payouts. Here is the video from Galli News…
Earlier this week, Hyderabad-based Shahbaz Ahmed Khan, who is vocal critic of Heera Gold's business model had filed a complaint alleging life threats from Dr Shaik. Speaking with The Hans India, Khan had said that ever since he started questioning about the ‘dubious’ nature of the business which offers investors a monthly return of Rs3,000 per Rs1 lakh, he has been facing life threat from the business woman-turned-politician. “At least three investors have approached me to help them. Hence, I request the police department to enquire into the businesses of the Heera Gold. For the past eight years, I have been facing threat from the woman,” Khan was quoted as saying in the report.
We tried to call the company at several numbers listed under an address at Banjara Hills, Hyderabad on its website but they were all unreachable. The Heera Gold complaints boardreveals that most of the financial problems and delays in crediting interest/profit share have started in the past 3 or 4 months. Until then the board was inundated with questions about how to invest in the group