SEBI initiates recovery proceedings against PACL

COIMBATORE: Market regulator SEBI has initiated recovery proceedings against PACL and its promoters/directors for their failure to refund an amount of Rs. 49100 crore due to investors, along with further interest and all costs, charges and expenses incurred.
The action against PACL was the biggest ever crackdown on largescale illicit money pooling scheme by SEBI in a case that dwarfed the clampdown on Sahara.The recovery proceedings have been initiated for the failure to comply with the directions of SEBI wherein the regulator directed the defaulters to wind up the schemes, and refund money to the investors within a period of three months from August 22, 2014, the date of the order.
SEBI has attached all bank and demat accounts and mutual funds (MF) folios of the defaulters with immediate effect and communicated the same to all the banks, depositories and MF houses. The mobilization of funds by PACL traces back to 1997.
After receiving a complaint, SEBI issued letters dated November 30, 1999 and December 10, 1999 to PACL advising it to comply with the mandatory regulations. PACL challenged it in the Rajasthan High Court the same year claiming that its scheme does not fall under the definition of CIS (collective investment schemes) as defined under the CIS Regulation/SEBI Act. PACL also challenged the constitutional validity of the CIS Regulations.
The Rajasthan High Court, in its order on November 28, 2003, held that PACL's schemes were not CIS as defined under Section 11AA of the SEBI Act and quashed SEBI's letters. SEBI appealed against the decision before the Supreme Court. The Supreme Court, in its order on February 26, 2013, while allowing the appeal upheld the constitutional validity of CIS Regulations, directed SEBI to investigate the matter and take appropriate actions.
After conducting inquiry, SEBI directed PACL, its promoters and directors to wind up all the existing collective investment schemes and refund the monies with returns which are due to its investors as per the terms of offer within a period of three months from the date of the order. The order was passed on August 22, 2014.
PACL filed an appeal in the Securities Appellate Tribunal (SAT) against the order, which was dismissed on August 12, 2015. SAT directed the defaulters to refund the money within a period of three months. “Since defaulters failed to refund the money to the investors as per the directions of SEBI and SAT, SEBI has initiated the recovery proceedings,” the market regulator said.