PACL which has raised Rs55,000 crores, seeks stay from Delhi HC against SEBI’s recovery order

Moneylife Digital Team 28 December 2015

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

Comments

User

PPM

1 decade 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 decade ago

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

Vaibhav Dhoka

1 decade 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 decade 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?

Binod Sarma

Replied to Meenal Mamdani comment 1 decade 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.