By Raju Vernekar
Mumbai, Oct 25:
The Supreme Court (SC) has vacated the stay granted by the Securities Appellate Tribunal (SAT) to the order issued by the Securities and Exchange Board of India( SEBI) to attach the properties of the associate companies of the Pearls Agrotech Corp. Ltd (PACL) involved in multi-crore rupees investment fraud.
The stay was vacated by a three member bench comprising Justices D Y Chandrachud, Vikramnath and B V Nagarathna on October 06, 2021. Now the matter is slated to come up for further hearing on October 26, Tuesday.
When the matter was heard on October 06, 2021, the SC ruled that the SAT’s order dated March 26, 2021 (passed in appeals No 161 and 162/2021) shall stand vacated and further proceedings in these appeals will remain stayed. The SEBI’s attachment order dated March 01, 2021 shall continue to remain in operation to the extent of an amount of Rs 49.67 crore.
“Alternatively, we grant liberty to the DDPL Global Infrastructure Pvt. Ltd (DDPL) and the Unicorn Infra Projects and Estate Pvt. Ltd (Unicorn) to deposit an amount of Rs 49.67 crore in an Escrow account to the satisfaction of SEBI. DDPL and Unicorn shall be at liberty to submit their objections to the SEBI’s attachment order, before R S Virk, former District Judge, appointed by the SC”, the SC stated.
The PACL had transferred Rs. 110.95 crore to 5 companies, which in turn transferred the amount to 25 entities, who were its associates. These entities invested Rs.110.95 crore in Scheme I of the Systematix Venture Capital Trust (Systematix). The total corpus of the Scheme-I was Rs.113 45 crore.
Gurmeet Singh, the Director of PACL was a director of DDPL since June 01, 2011, much before investments were made by “Systematix” in DDPL. Singh stated to have resigned on September 11, 2012 after the investments were made in DDPL by “Systematix”. The Unicorn and DDPL had common directors who held substantial shareholdings in these companies. The Unicorn and DDPL function from the Unicorn House, located at Kandivali West in North Mumbai.
Prior to investment made by “Systematix”, the PACL held 40 percent shareholding of DDPL, Prateek Kumar held 11 percent, Dharmendra P Shah and Hemant Patil held 16.34 percent each. After the investment, Systematix held 50% shareholding and Gurmeet Singh held 1 % and NSB Infrastructure and Projects held 16.34%
Of the total amount of Rs 110.95 crore, the Justice R M Lodha Committee (appointed by the SC to sale PACL’s properties to refund investors’ money) recovered Rs.42.24 crore from “Systematix”. SEBI initiated action for the recovery of the remaining amount on July 25, 2016 and August 04,2017 and issued an attachment notice dated April 30, 2019 with respect to twenty five entities. SEBI conducted further investigation into all fund transfers of “Systematix” and placed it before the Lodha Committee.
Accordingly, the SEBI issued a notice of demand and passed an attachment order on March 01, 2021. However Unicorn and DDPL challenged the attachment notice before the SAT. The SAT stayed the attachment orders on March 26,2021 and permitted both DDPL and Unicorn to operate their accounts in the ordinary course of business.
While dealing with other interlocutory application, the SC directed the official liquidator of the Delhi high court to hand over possession of the property situated at C-55, Sector 57, NOIDA, UP to the SEBI’s authorized representative.
The SC also directed the Justice R M Lodha Committee to delete the plot 6 No.139 ( admeasuring 810 Sq. Mtrs) located at Block-A of Sushant Lok Phase III, a township of M/s. Ansal Properties & industries Ltd. at sector 57, Gurgaon –122003 from the list of properties maintained by PACL and declare that this property does not belong to the PACL. The SC gave these instructions while confirming the order dated March 11,2020, passed by the Judge (Retd) R S Virk stating that this property belonged to Mrs Vijay Kalia who had transferred it to her sons-Shekhar and Siddharth Kalia.
The SC also heard the eight interlocutory applications, in which the applicants had placed their claims for evaluation before Judge R S Virk. The SC stated that the claims have been found to be valid. Hence, the properties claimed by them be released and the applicants be issued no objection certificates.
History of the scam
The PACL was floated by Nirmal Singh Bhangoo in 1996 and had extracted money from the investors by promising them to give land at cheaper rate across the country. Bhangoo had also floated the Pearls Golden Forest Limited.
The SEBI had concluded that the PACL had mobilized an amount of Rs 49,100 crore (with interest now swelled to Rs 55,000 crore) from over 6 crore investors Pan India, under a collective investment scheme (CIS) without registration and in violation of the SEBI (Collective Investment Schemes) Regulations 1999.
The SEBI by its order dated August 22, 2014 directed PACL to wind up its schemes and refund Rs 49,100 crore to the investors within three months from the date of the order. , Subsequently the SEBI attached all bank, demat accounts and mutual fund portfolios of PACL and its eight directors and promoters, for its failure to comply with its order. PACL filed an appeal before the Securities Appellate Tribunal (SAT), which was dismissed on 12 August 2015.
The SEBI issued recovery certificate (No 832 dated December 11,2015) against PACL and its promoters/directors: Tarlochan Singh, Sukhdev Singh, Gurmeet Singh, Subrata Bhattacharya, Nirmal Singh Bhangoo, Tyger Joginder, Gurnam Singh, Anand Gurwant Singh and Uppal Devinder Kumar.
The CBI registered a case against PACL and based on its complaint, the Enforcement Directorate (ED) lodged the first information report (FIR) against PACL in 2015. The PACL promoter (CMD) Nirmal Singh Bhangoo and his three colleagues- Sukhdev Singh, MD, Gurmeet Singh and Subrata Bhattacharya-Executive directors) were arrested by CBI in 2016. In September 2018, the ED filed a charge-sheet against PACL and attached Australia-based assets of the Pearls Group worth Rs.472 crore.
During the investigation by Central agencies, the Executive Director of the PACL had admitted that the company dealt in land through its 250 associate companies (which was later confirmed by PACL to be 640 associate companies). Thus, there existed a wide network of companies where assets of PACL were parked.
Subsequently while dealing with Civil Appeal (No C.A. No.13301/2015 – Subrata Bhattacharya (one of the directors of PACL) Vs. SEBI), the SC on February 02, 2016, set up the Justice R M Lodha Committee, to dispose of the land parcels of PACL in order to utilize the sale proceeds to repay the amounts invested by the investors.
As per SEBI, out of 1.50 crore claims, it has refunded Rs. 438.34 crore to 12,70,849 eligible applicants as of March 31,2021. It has also been able to attach PACL’s property worth Rs. 472 crore. In the meanwhile Bhangoo, his daughter and his son-in-law are among those who are in jail.
