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Sebi slaps highest-ever Rs 7,269.5 cr fine on PACL for duping investors

Under Sebi norms, it can impose a penalty of Rs 25 crore or three times of the profit made by indulging in fraudulent and unfair trade practices.

By: ENS Economic Bureau | Mumbai |
September 23, 2015 1:26:02 am

The Sebi on Tuesday imposed a penalty of Rs 7,269.5 crore on Pearls Agrotech Corporation Limited (PACL) and its four directors for illegal and fraudulent mobilisation of funds from the public.

While imposing the penalty, the biggest in its history, Securities and Exchange Board of India (Sebi) said the company deserved “maximum penalty” for duping the common man. The penalty follows another order by Sebi last year wherein PACL was asked to refund Rs 49,100 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, where PACL had filed an appeal. This is the biggest-ever amount, as also the largest number of investors, so far involved in a case found to be running illegal money pooling scheme. The amount concerned is twice that collected by the Sahara Group, which is said to have mobilised Rs 24,000 crore.

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In April 2015, the Supreme Court had cleared the decks for a quick sale of all the assets of the Pearls Group’s companies, which owe money to at least 5.85 crore investors spread across Punjab, Haryana, Rajasthan, and Delhi. More than 10,000 properties of the companies are likely to be sold, besides liquidation of their various cash deposits, for paying back the investors.

The Sebi order on Tuesday said PACL made huge illegal mobilisation of money, leading to consequent profit to the tune of over Rs 2,423 crore in a short span of less than one year. “Keeping in view the entire facts and circumstances of the case, there cannot be a better case than this which deserves the maximum penalty,” it said. “In the recent past, the country has suffered a lot in the hands of entities who indulge in such illegal money mobilisation under various schemes, wherein hard earned money of the common man has been duped.”

“Thus, imposition of deterrent penalty is the need of the hour,” Sebi said, while adding that its Prevention of Fraudulent and Unfair Trade Practices Regulations provides for “severe to severe penalties” for dealing with such violations.

Under Sebi norms, it can impose a penalty of Rs 25 crore or three times of 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 of the illicit gains.

Sebi said that 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 including in the name of purchase and development of agriculture land. PACL and its directors have been told pay the amount to Sebi within 45 days.

In August 2014, Sebi had ordered the immediate closure of unauthorised collective investment schemes run by PACL and refund investors’ money within three months.

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