Market regulator Securities and Exchange Board of India (SEBI) on Tuesday imposed a whopping penalty of Rs7,269.5 crore on PACl ltd and its four directors for illegal and fraudulent mobilisation of funds from the public, saying the company deserves “maximum penalty” for such a large-scale fraud.
“Keeping in view the entire facts and circumstances of the case, there cannot be a better case than this which deserves the maximum penalty,” SEBI said in a strongly-worded order.
The market regulator said its probe revealed that PACl and its four directors — Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya — had mobilised funds from the general public through illicit Collective Investment Schemes (CIS), including in the name of purchase and development of agricultural land.
The penalty follows another order by SEBI last year wherein PACl was asked to refund the Rs49,100 crore it had collected through illicit schemes over a 15-year period.
The refund order was also upheld last month by the Securities Appellate Tribunal (SAT), where the PACl had filed an appeal. In its latest order on Tuesday, SEBI said that PACl engineered huge illegal mobilisation of money, leading to consequent profit to the tune of Rs2,423 crore in a short span of less than one year.
Seeking to send a strong message to the securities market at large that such unwanted violations would not be viewed lightly, SEBI said: “In the recent past, the country has suffered a lot at the hands of entities who indulge in such illegal money mobilisation under various schemes, wherein the common man has been duped of his hard-earned money.”
“Thus, imposition of deterrent penalty is the need of the hour,” SEBI said, while adding that its Prohibition of Fraudulent and Unfair Trade Practices Regulations provides for severe penalties for dealing with such violations.
Under SEBI norms, it can impose a penalty of Rs 25 crore or three times the profit made by indulging in fraudulent and unfair trade practices and in the present case the regulator has imposed a fine equivalent to three times the illicit gains. The company and its directors have been told to pay the amount to SEBI within 45 days. The firm was running a land purchase scheme through which it was raising money from the public. In the guise of selling agricultural land, it collected Rs 49,100 crore from 5.85 crore customers over a period of 15 years by promising them that the investments in the schemes of the company were highly profitable.
This is the biggest-ever amount, as also the largest number of investors involved in an illegal money pooling scheme case. In August last year, SEBI had ordered the immediate closure of unauthorised CISs run by the PACl and refund of investors’ money within three months.
Besides, the capital market regulator had said it was initiating further proceedings against the company and its directors for fraudulent and unfair trade practices, as also for violation of SEBI’s CIS Regulations, among others, as per a direction from the Supreme Court (SC).
However, the company maintained that it was not running any illicit scheme and was in fact engaged in the business of sale and purchase of land. The SEBI first issued a notice in November, 1999, to PACl, alleging that it ‘was operating CIS, wherein the funds of the investors were pooled and utilised towards the cost of land, registration expenses, developmental charges and other incidental expenses.”
The case later went to courts, while the SC passed an order in February 2013, directing SEBI to determine whether the business of the company fell within the purview of CIS or not and take further action in accordance with the law.
Promoters and directors of the PACl have been involved with the Pearls Group and the PGF Group, among others. Following the SEBI’s order, the PACl had approached the SAT for further probe. But the tribunal, last month, upheld the markets regulator’s order against the company.