SAT upholds SEBI’s order asking the company to refund money to investors
In another step towards unravelling the mind-boggling Rs49,100 crore raised by PACL Ltd through a collective investment scheme (CIS), on 18th August, the Securities Appellate Tribunal (SAT) has upheld SEBI’s order asking the company to refund the money to investors in a land-purchase scheme that operated like a mutual fund. Even as various regulators—and, the Andhra Pradesh police—have been tracking PACL (formerly Pearls Agrotech Corporation Ltd) for over 15 years, the company continued to raise thousands of crores of rupees more from gullible investors without any regulatory approval. According to SEBI, PACL has 58.5 million customers.
Land-ownership being an emotive issue for Indians, the company was easily able to collect money. Interestingly, the SAT order says that the total land held by PACL in the form of stock-in-trade is only Rs11,707 crore and it has sale deeds in respect of only 19,284 investors. In the past few years, PACL has even attempted to legitimise its operations by having its land holdings registered with a trustee company. In 2010, the Times of India had reported that much of the land acquired by PACL was on the India-Pakistan border and in the Thar desert!
Remember, PACL had gone on to raise Rs20,000 crore from investors by 2011, although SEBI had issued an order against it as far back as in 2002. Since then, PACL has taken full advantage of our slow judicial process to challenge the regulator’s authority in multiple forums, while continuing to raise further funds. Finally, the Supreme Court referred the case back to SEBI and asked the regulator to initiate appropriate action. Since the company challenged this order before SAT, it is more than likely that it will again attempt to approach the apex court before we see any sign of money being refunded to the public.
PACL has been given three months to comply with SEBI’s order, which means that, at the end of November, it is supposed to refund a massive sum to investors. Will this saga, which began with SEBI’s first notice to PACL in 1999, end this year? Unlikely. The PACL saga will probably follow that of the Sahara Parivar which had advertised plans to refund Rs74,000 crore raised by it (in residuary non-banking finance company) ahead of time but has tied itself up in knots.
Meanwhile, a leading newspaper has already taken on the job of white-washing the company with a report which claims that its investors are ‘standing by it’ and that it should be given time to make its payments. This is akin to the Sahara group’s absurd strategy of employing digital media teams to post comments in its favour. SEBI’s relentless crackdown on dubious CISs is commendable, but the effort involved in bringing a Sahara, an Alchemist, a Rose Valley, a Royal Twinkle or a PACL to book shows how easy it is for dubious entities to raise a few thousand crores of rupees by entrapping gullible Indians with the promise of high returns.