Home / Companies / Meet PACL Ltd, the company at the receiving end of Sebi’s largest ever penalty

Mumbai: On Tuesday, the Securities and Exchange Board of India (Sebi) imposed its highest ever penalty of over Rs7,000 crore on a company called PACL Ltd.

The penalty came after close to 13 years of investigation into a firm which has allegedly duped its investors of Rs49,000 crore. PACL spent years collecting money from investors with the promise of giving them land. Everyone in India wants to own land and so the scheme worked magically. But the scope and the scale of the scheme that the promoters of PACL (Tarlochan Singh, Sukhdev Singh, Gurmeet Singh and Subrata Bhattacharya) ran is staggering.

Here is some of what Sebi’s investigation and final order into PACL tells us about one of the largest ponzi schemes in recent times.

According to Sebi’s investigations, Delhi-based PACL operated from 15 regional offices and had 3.35 million field associates in 2011-12. The company offered two kinds of plans—a cash-down payment plan and an installment payment plan. Under the former, it offered to allot land to customers within 270 days of payment and under the latter, within 90 days.

As of March 2012, according to the company’s disclosures to Sebi, 12.2 million customers had been allotted land against advances of Rs14,331 crore. The company further disclosed that it had collected another Rs29,420.65 crore from 46.31 million customers to whom it had not allotted any land.

Sebi’s investigation pegged the total funds mobilized till March 2012 at Rs44,736 crore.

The problem was that the company simply did not have enough land for all its investors.

In an August 2014 order, Sebi had said that the value of total land held by the company was Rs11,706.96 crore—agricultural land worth Rs7,322.11 crore and commercial land worth Rs4,384.84 crore.

“The company has only land worth Rs11,706.96 crore out of which it has not only to satisfy the claim of 4.63 crore customers who have deposited Rs29,420 crore with it, but also to satisfy 1.22 crore customers to whom the land has been allotted but sale deeds have not been executed... In view of the above, the proposal does not appear to be serious and reasonable," Sebi’s whole-time member Prashant Saran said in the order.

In order to escape scrutiny of the investors they tapped, PACL ensured that investors were based far away from where the land was located.

For instance, the company allegedly sold land in Tamil Nadu to investors from Rajasthan and Uttar Pradesh so that they have no control on the purchased assets.

“It would not be practically possible for the customers residing in the villages of Rajasthan and Uttar Pradesh to control/supervise the property in Tamil Nadu purchased by them. It may not be possible for such customers to even ascertain whether the Noticee No 1 (PACL) has carried out its promise of development," says the Sebi order issued on Tuesday.

The schemes ran successfully for 15 years, even though they came under regulatory scrutiny long before Sebi shut them down in August 2014 and asked PACL to refund money to investors.

In 2002, Sebi had ruled that the schemes offered by PACL were in the nature of collective investment schemes (CIS) and that the company could not function without Sebi registration.

This order was quashed in 2003 by the Rajasthan high court, and challenged by Sebi the following year. In September 2011, Sebi moved the Supreme Court seeking an early hearing in the case. In March 2013, the apex court directed Sebi, the income-tax department and the Central Bureau of Investigation to scrutinize the company.

In February, CBI registered a case against the promoters of PACL after an investigation into allegations of collection of public deposits under the garb of allotment of farm land to depositors.

On Tuesday, Sebi directed PACL and its four directors to pay a penalty of Rs7,269.50 crore for illegally raising money from investors without the necessary regulatory approvals. The amount was three times the amount of illegal gains made by the company through the scheme -- the maximum penalty permitted under Sebi norms.

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