SEBI Order holds PACL is a Collective Incentive Scheme (CIS)

The SEBI has passed an order dated 22nd August, 2014 in a longstanding matter pertaining to Collective Investment Schemes (CIS). In the 90’s,  promoters of CIS lured investors with high returns particularly in plantations. The funds mobilized were mis-utilized for other purposes not disclosed to investors resulting in huge losses to investors. Therefore the SEBI Act was amended in 1995 banning existing CIS to operate unless registered with SEBI.

PACL was one such CIS. PACL defended its position saying their business was in the nature of sale and purchase of agricultural land and thus outside the purview of the securities market.  After a long litigation the Rajasthan High Court’s  order was overturned by the Supreme Court Order dated 26th February 2013.
 
SEBI has directed PACL to now windup the scheme and refund all the monies as promised to the investors within 3 months.  Read the SEBI order

The operative part of the order reads:

“In view of the observations made in this Order, I, in compliance with the directions of the Hon'ble Supreme Court, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992, hereby find that the business/activities/schemes/plans offered and operated by PACL are Collective Investment Schemes, satisfying all the ingredients specified under Section 11AA of the Securities and Exchange Board of India Act, 1992. The natural consequences of such findings would be to inter alia direct PACL and its directors and promoters to refund the monies, which have been collected in an unauthorized manner, with promised returns to investors. Accordingly, I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 and Sections 11, 11B and 11(4) thereof read with Regulation 65 of the Securities and Exchange Board of India (Collective Investment Schemes) Regulations, 1999, hereby issue the following directions:


a.    PACL Limited [PAN: AAACP4032A], its promoters and directors including Mr. Tarlochan Singh [PAN: AIEPS9489Q], Mr. Sukhdev Singh [PAN: AUGPS0130B], Mr. Gurmeet Singh [PAN: AAMPS1400Q] and Mr. Subrata Bhattacharya [PAN: AAIPB6480H], shall abstain from collecting any money from investors or launch or carry out any Collective Investment Schemes including the schemes which have been identified as a Collective Investment Scheme in this Order.

b.    PACL Limited, its promoters and directors including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh and Mr. Subrata Bhattacharya, shall wind up all the existing Collective Investment Schemes of PACL Limited and refund the monies collected by the said company under its schemes with returns which are due to its investors as per the terms of offer within a period of three months from the date of this Order and thereafter, within a period of fifteen days, submit a winding up and repayment report to SEBI in accordance with the SEBI (Collective Investment Schemes) Regulations, 1999, including the trail of funds claimed to be refunded, bank account statements indicating refund to the investors and receipt from the investors acknowledging such refunds.

c.    PACL Limited and its directors, including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh and Mr. Subrata Bhattacharya are also directed to immediately submit the complete and detailed inventory of the assets owned by PACL Limited.

d.    PACL Limited, its promoters and directors including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh and Mr. Subrata Bhattacharya, shall not alienate or dispose off or sell any of the assets of PACL Limited except for the purpose of making refunds to its investors as directed above.

e.    In the event of failure by PACL Limited and its directors/ promoters to comply with the above directions, the following actions shall follow:

- PACL Limited and its directors, including Mr. Tarlochan Singh, Mr. Sukhdev Singh, Mr. Gurmeet Singh, Mr. Subrata Bhattacharya, Mr. Anand Gurwant Singh, Mr. Nirmal Singh Bhangoo, Mr. Uppal Devinder Kumar, Mr. Tyger Joginder and Mr. Gurnam Singh (R/o Wazidpur) shall immediately (on expiry of the three months period available for making refunds) be restrained from accessing the securities market and would further be prohibited from buying, selling or otherwise dealing in securities market till all the Collective Investment Schemes of PACL Limited are wound up and all the monies mobilized through such schemes are refunded to its investors with returns which are due to them.
- SEBI would make a reference to the State Government/ Local Police to register a civil/ criminal case against PACL Limited, its promoters, directors and its managers/ persons in-charge of the business and its schemes, for offences of fraud, cheating, criminal breach of trust and misappropriation of public funds; and
- SEBI would make a reference to the Ministry of Corporate Affairs, to initiate the process of winding up of the company, PACL Limited.

- Without prejudice to the above, SEBI shall also initiate attachment and recovery proceedings under the SEBI Act and rules and regulations framed thereunder.

Read the SEBI order