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Tuesday, October 4, 2022

The Lodha Committee Invites Claims for Refund From Duped Investors

According to Vishal Mhetre, Secretary of the Janhit Association, the SEBI’s invitation to submit the PACL certificate is fraught with infirmities

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Raju Vernekar
Raju Vernekar
Raju Vermekar is a senior Mumbai-based journalist who have worked with many daily newspapers. Raju contributes on versatile topics.

INDIA. Mumbai: The Securities and Exchange Board of India (SEBI) has asked investors to submit claims by the end of June to the Justice (retired) R M Lodha Committee, which was set up to sell the assets of the defunct Pearls Agrotech Corporation Limited (PACL) and refund money to over five crores of duped investors.

“The Nodal officer-cum-secretary, of the Committee, vide Public notice dated March 27 has asked eligible investors with claims between Rs 10,001/- to Rs 15,000/- to submit their original PACL certificates, for refund. The SMS shall be sent to the original investors asking them to submit PACL registration certificates,” the notice stated.

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“The PACL investors who receive SMS from the committee requiring submission of original PACL certificates, are requested to forward the same to Post Box No 66, Belapur Post Office, Navi Mumbai -400614. The investors should send original PACL certificates in the envelope and the certificate number should be written on top of the envelope”, the SEBI’s notice stated.

“The window for accepting the certificates shall remain open from April 01 to June 30. The claimants should ensure that the PACL certificates should reach the specified address on or before 5.00 pm on June 30. The investors are cautioned not to part with their original certificates unless SMS is received from the committee directing them to submit the certificates”, states the notice.

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However, according to Vishal Mhetre, Secretary of the Janhit Association, spearheading the cause of the duped investors, the SEBI’s invitation to submit the PACL certificate is fraught with infirmities. The committee is yet to declare the up-to-date details of the money refunded by it to the investors.

Besides, the process of auctioning PACL’s attached properties is very slow and it does not serve as a deterrent against the PACL, which has already sold/leased out some of its properties. The committee is yet to make available the updated details of the amount recovered from the sale of PACL’s properties. The Committee has been set by SEBI, as per the directions of the Supreme Court.

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“As per SEBI, out of 1.50 crore claims it received, it refunded Rs. 438.34 crore to 12,70,849 eligible applicants as of March 31, 2021. However as per records, SEBI has recovered a larger amount but a limited number of investors have received a refund,” Mhetre said. 

The Committee has asked for the PACL certificates through the post office instead of asking the investors to deposit them in the Committee’s office at SEBI Bhavan at Bandra in northwest Mumbai. No one knows who will bear the responsibility- SEBI, Lodha Committee, or the Supreme Court if the certificates are lost in transit.

“The Committee has entrusted the job of certificate collection to an outside party. As such abundant precaution is required in the certificate collection,” Mhetre added.

But the important aspect is whether the committee has enough funds to manage the refunds since the amount required to refund investors’ money is mind-boggling. The Committee in its report submitted to the Supreme Court in 2016 had stated that a total of Rs 57,927 crore would be required to refund the money.

This includes Rs 47,154 crore required to refund 2,21 crore investors falling under Rs 10,000 and above category, for which the Committee has now invited the PACL certificates.

The funds required

The Committee has enlisted the refund expenditure as: Re 01-Rs 1500 investment –the number of investors-1.07,87.560–amount required Rs 832,76,79,808 (Rs 832 crore), Rs 1501-Rs 2500 investment –the number of investors-35,14,464–amount required Rs 717,26,30,940 (Rs 717crore), Rs 2501-Rs.5000 investment –the number of investors-58,59,211–amount required Rs 21,15,53,86,880 (Rs 2115 crore)

Rs 5001-Rs.7500 investment –the number of investors-46,18,007–amount required Rs 28,91,45,78,384 (Rs 2891crore), Rs 7501- Rs.10,000 investment –the number of investors-45,78,735–amount required Rs 42,15,71,62,382 (Rs 4215 crore) and Rs 10,000 and above investment –the number of investors-2,21,43,059–amount required Rs 4,71,54,54,58,130 (Rs 47,154 crore). Total number of investors- 5,15,01,036 -the amount to be refunded – Rs 5,79,27,28,96,523.50 (Rs 57,927 crore).

“In these circumstances, the speedier disposal of PACL’s properties is the only solution,” Mhetre said.

Sale of properties  

As per SEBI’s records, the Committee has been able to recover roughly Rs 879.85 crore from the PACL. The PACL’s property worth Rs 27,000 crore spread across the country, is being sold. The Committee has attached the bank/ Demat accounts of 640 associate companies of PACL. It realized Rs 98.45 crore from the FDRs of PACL and its associates and also recovered Rs.308.04 crore lying in PACL’s bank accounts.

It received Rs.52,77,597/- from Punjab’s Collector (Land Acquisition), as compensation for the acquisition of properties.

Of 27500 properties, the Committee was able to sell 113 properties (although the auction process was completed for 872 properties) and could generate Rs. 89 Crore. In addition, the Committee realized Rs. 14.64 crore, by auction of 75 PACL vehicles.

Besides, the Committee under an order dated June 03, 2020, of the Federal Court of Australia (FCA), received an amount of Rs.3,69,20,34,883.00. The amount was recovered from the sale of the assets of McCullough Robertson, a trust set up by PACL in Australia.

PACL’s history

PACL was incorporated on February 13, 1996, in Jaipur (Rajasthan). The firm collected money from the investors promising them land at a cheaper rate although it did not possess even an inch. In response to cheated investors’ complaints, the SEBI on August 22, 2014, asked PACL to wind up and refund investors’ money within three months. The CBI filed an FIR against the company in 2014. 

The SEBI attached its properties on December 11, 2015. The CBI arrested PACL CMD Bhangoo, promoter-director Sukhdev Singh, directors- Gurmeet Singh, and Subrata Bhattacharya in January 2016 and filed a charge sheet under Section 120B and 420 of IPC, in April 2016. In response, Subrata Bhattacharya moved to the Supreme Court.

In 2015, the Enforcement Directorate (ED) filed the Enforcement Case Information Report (ECIR) against Bhangoo and others including the directors of PACL and the Pearls Golden Forest Ltd (PGFL), another firm floated by them, which collected Rs. 5000 crore from the investors. On December 11, 2016, SEBI initiated recovery proceedings and on September 06, 2017, imposed a fine of Rs 2,423 crore on PACL for non-compliance with its orders.

In September 2018, the ED filed a charge sheet against PACL and attached its Australia- based assets. In the same year, SEBI filed a petition in the FCA, to recover the money stashed away by the PACL in its shell entities in Australia.

Supreme Court hearing

In another development, various applications and petitions, including the Committee’s report about the sale of PACL properties, are being heard, in the Supreme Court. They include Civil appeal (No 13301/2015)-Subrata Bhattacharya Vs SEBI and (appeal No 13394/2015) PACL Vs SEBI.

As of now, 17 people including Bhangoo, his wife Prem Kaur, daughters Sukhwinder Kaur and Barinder Kaur, and sons-in-law- Gurpartap Singh and Harsatinder Singh are in Tihar jail in New Delhi.

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  • Raju Vernekar

    Raju Vermekar is a senior Mumbai-based journalist who have worked with many daily newspapers. Raju contributes on versatile topics.

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