The Securities and Exchange Board of India (Sebi) has moved the Supreme Court for an early hearing in a seven-year case against realty player PACL India.
The market regulator had filed an affidavit earlier this month, saying the schemes of PACL were not being regulated by any statutory regulatory authority and posed a threat to investors. “Certain circumstances have arisen that merit early disposal of the case, as the fate of hundreds of thousands of small-time investors is at stake,” Sebi said in the affidavit.
In 2002, Sebi had held that PACL’s schemes came under Collective Investment Scheme (CIS) regulations and directed the company to comply with the relevant rules. In 2003, the Rajasthan High Court quashed the Sebi order. The regulator had challenged this in the apex court in 2004. But the case had not appeared in the court since 2006, according to investors. Meanwhile, PACL has continued its operations and has amassed deposits worth Rs 20,000 crore.
Business Standard has reviewed a copy of the affidavit, shared by Sebi with a delegation of investors led by Mumbai-based Investors and Consumer Guidance Society. Investors have been demanding action from Sebi as schemes of PACL continue to raise money from small investors and have grown manifold. They have also asked Sebi to include a prayer for an interim stay from the court. “We pointed out how the Supreme Court has clubbed the matters of PACL and another group firm PGFL. PGFL has been asked to stop raising money, whereas PACL continues to despite the modus operandi of both firms being same. Sebi officials have agreed to add prayers for an interim stay in the affidavit,” said an official of Investor and Consumer Guidance Society.
PACL collects subscriptions from investors and the funds are pooled and utilised towards cost of land, registration expenses, development charges and other incidental expenses. The investor is entitled to receive an “estimated realisable value” at the end of the term.
“Deposits have reportedly swollen to more than Rs 20,000 crore. The appellant submits that the activities of Respondent No 1 are in the nature of Collective Investment Schemes as defined under the Sebi Act. The respondent company defies being regulated, despite the fact that similar schemes already stand covered by the CIS regulations,” the regulator said.
The plea also referred to a July judgement of the Gwalior bench of the Madhya Pradesh high court. It had held several companies, including PACL, are fraudulently raising money and issued directions that these be closed. The court also recommended a Central Bureau of Investigation (CBI) enquiry into the money-raising activities of these firms.
“As the matter is sub judice, we would not like to comment on the issue,” a spokesperson for PACL India Limited said in an email response to a quarry.
The regulator said since all the ingredients of collective investment schemes are present in PACL schemes, they are not mere sale purchase transactions as claimed by the company.
“In case no action is taken now despite the fact (they are CIS).the company will continue to mobilise funds to the detriment of investors and without any regulation,” the affidavit said adding, “It is submitted that the interest of investors who have invested in Respondent No 1 are severely prejudiced for, if the company runs into bad weather there would be no resources for investors to fall back on.”