Stocks

SEBI impounds Pearls Agro assets

Our Bureau Mumbai | Updated on January 22, 2018 Published on December 14, 2015

Action follows firm failing to repay investors ₹49,100 cr

Equities and commodities market regulator SEBI has initiated recovery proceedings against Pearls Agrotech Corporation (PACL) for failing to refund ₹49,100 crore to investors.

The action has been taken against 10 entities, including PACL and its promoters/directors.

Under the recovery proceedings, SEBI has attached all bank and demat accounts, as well as mutual funds folios of the above entities with immediate effect and communicated the same to all banks, depositories and mutual fund houses.

The company collected money from customers promising them land. However, no sale deeds have been signed with the investors.

Last week, BusinessLine had reported that harried investors of Pearls Agrotech Corporation had urged SEBI to seize the bank accounts and properties of the company.

Vishwas Utagi, Convener, All India PACL (Pearls) Investors Association, had said SEBI should open a separate counter for Pearls Agrotech investors to register their claims as was done in the Sahara case. “What is the use of imposing a fine on the directors and companies if they are not going to pay it even after 120 days after the order was passed? SEBI has all the powers to seize and dispose of the assets and it should use them to repay Pearls investors,” Utagi had said.

Action after SAT ruling

The SEBI action comes three months after the Securities Appellate Tribunal dismissed the appeal filed by PACL and its promoters/ directors against a SEBI order of August 22, 2014, directing them to wind up their collective investment scheme (CIS) and refund the monies to investors. SEBI said that the recovery notices were also sent to the defaulters.

Banks, financial institutions, depositories or any other persons holding assets of the defaulters have been advised not to part with the same and report the same to the Recovery Officer, at SEBI’s Northern Regional Office.

Prior to 1997

SEBI had observed that PACL had been mobilising funds prior to 1997. On receiving a complaint, SEBI wrote two letters in November and December 1999 to PACL advising it to comply with the provisions of the CIS Regulations.

PACL challenged these letters before the Rajasthan High Court in December 1999, claiming that its scheme did not fall under the definition of CIS, besides challenging the constitutional validity of the CIS Regulations.

The Rajasthan High Court in its order dated November 28, 2003, held that PACL’s schemes were not CIS as defined by the SEBI Act and quashed both the SEBI letters of 1999. The matter then went to the Supreme Court.

The Supreme Court vide its order dated February 26, 2013, while allowing the appeal, upheld the constitutional validity of CIS Regulations, and also directed SEBI to investigate the matter and take appropriate action.

Following an inquiry, SEBI ordered PACL to wind up all the existing CIS and refund the monies collected to investors within a period of three months.

PACL then approached SAT which dismissed its appeal on August 12, 2015, and gave it three months to refund ₹49,100 crore.

Published on December 14, 2015
This article is closed for comments.
Please Email the Editor