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SEBI orders attachment of bank accounts of PCL directors

by Raju Vernekar
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By Raju Vernekar
Mumbai, April 3:

While SEBI has issued penalty notices to directors of the erstwhile Pancard Club Limited(PCL), a time share company, in a Rs.7035 crore collective investment fraud, due to the stay by the Bombay high court, SEBI has been unable to auction properties of PCL spread across the country.
Up till now the SEBI has been able sell only two properties. SEBI sold two properties- Panvel(Rs 68.09 lakh), Mumbai( Rs 1.34 crore) by auction on June 20, 2018,. These properties were purchased by Dilip Dipchand Manwani and Dimple Barola respectively.
Fire at PCL hotel in Pune
While the issue of refund to investors remains unresolved, the hotel of PCL located at Baner in Pune was gutted in a fire on January 06,2020. It was stated that the fire broke out due to short circuit. However further investigation remained inconclusive.
Notices to Directors
The SEBI has served notices dated March 26, 2021(proceedings 6460 -2021, recovery certificate No 3253 dated February 08, 2021) to PCL, Prabhadevi (now defunct) and independent and non-executive directors- Shobha Ratnakar Barde (Borivali), Manish Kalidas Gandhi(Vasai), Chandrakant Ganpatrao Bhise (Sion) and Ramchandran Ramkrishnan (Malad) directing them to pay- 21,26,25,658/-(Penalty Rs 20 crore, Interest @ 12 per cent(July 31, 2020 to February 08, 2021)- Rs.1.26,24,658/- and recovery cost Rs 1000/-), as directed by SEBI’s Adjudicating Officer vide order dated July 31,2020.
The SEBI has asked all the banks and mutual funds in India to attach the accounts of these four directors, accused of duping 51.55 lakh investors to the tune of Rs.7035 crore.
The National Securities Depository Limited, Lower Parel, Mumbai and Central Depository Services (I) Limited, Dalal Street, Mumbai have also been asked to attach the accounts of the directors of the PCL.
Attachment notices have been issued under sections 28(A) 1, 11(2) (ia) of SEBI Act 1952, read with section 226 of second schedule to the IT Act 1961. The directors have been held responsible for violating rule 4(2)(t) of the Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market)( PFUTP) Regulations, 2003.
PCL started in 1990 mobilized money under its holiday scheme. It offered one and half time returns on money invested for three years, double returns after 6 years, two and half times returns after 9 years and two and three times returns after 10 years. PCL allegedly duped investors between 2002 and 2014 through its various holiday and collective investment schemes. 
The packages
The packages offered by PCL included: Luxury Membership For 6 years, Premium Holiday Membership for 10 years, Regular Holiday Membership for 10 years, Royal Membership for 9 years, Standard Membership for 9 years, Supreme Holiday Membership for 9 years, Golden Holiday Membership for 5 years, Platinum Holiday Membership for 6 years, Regal Holiday Membership for 9 years, New Comfort Holiday Membership for 3 years, New Luxury Holiday for 3 years, New Royal Holiday for 9 years, Delight Holiday for 6.3 years, Relax Holiday for 3.3 years, New Premium Holiday for 10 years, New Regular Holidays for 10 years, Sunrise Holidays for 5 years, Divine Holiday For 66 months and Dezire Holiday For 37 months. Under All the above mentioned schemes, the applicants were also offered free insurance benefits from IRDA approved Insurance companies.
The Analysis of the above mentioned schemes led to show that most of the customers/ investors of PCL preferred surrendering the room nights to PCL and the percentage of such customers/ investors who opted to surrender room nights in all but one schemes was over 99%. In one scheme viz. “Pancard Clubs – Golden Holiday Membership For 5 years” till March 31, 2014, 100% of room nights were surrendered by the customers/ investors of PCL. Apart from the above options to the investors, an option of converting the unutilized room nights to the extent of surrender value into shares, debentures at the discretion of PCL was also given.
Hotels in India and abroad
PCL was a part of “Panaromic Group of Companies” having interest in hospitality, time share, travel & tourism and Information Technology. The group has presence in India, USA, Thailand and New Zealand. It owns and operates hotel properties at 31 locations across the globe with 22 hotels in India, four hotels in USA, one hotel in New Zealand and condominium units in Thailand. It Also has reciprocal club affiliation with several clubs and resorts across India.
Action by SEBI
In 2010, SEBI scrutinized the documents relating to the business carried on by PCL and objected to its activities saying that its share capital stood at a meagre Rs 50 lakh, while the money mobilized under its holiday scheme was over Rs 7,000 crore. Besides, investment to the tune of over Rs 1,000 crore was made towards acquiring hotels and resorts, thereby expanding inventory of properties on offer in the holiday scheme by utilising the proceeds of its money doubling scheme.
SEBI noted that PCL had mobilised Rs 7,035 crore from 51,55,516 investors from 2002 to 2014 through its various holiday schemes. On July 31, 2014, SEBI asked the company and its directors —”not to collect any fresh money from investors under its existing scheme and not to launch new schemes or plans or float any new companies to raise fresh money.” 
In November 2015, the Securities Appellate Tribunal (SAT) asked PCL to immediately repay investors who had filed the intervention applications. On February 29, 2016, SEBI ordered PCL, to provide full inventory of all the assets and details of properties held by its directors.
However the company failed to comply with SEBI’s directions to refund to investors their money. The functionaries of PCL included: CMD late Sudhir Morawekar (expired on ( July22,2017), and Directors- Shobha Ratnakar Barde, late Usha Arun Tari(expired on September 11,2018),, Manish Kalidas Gandhi, Chandrasen Ganpatrao Bhise and Ramchandran Ramkrishnan.
“The corpus of money accumulated by PCL by way of contributions to the holiday scheme was well above the limit of Rs 100 crore set under the proviso of clause 1 of subsection 2 of Section 11AA of the SEBI Act, crossing which, a scheme is deemed to be a Collective Investment Scheme(CIS)” the bench comprising Justice J P Devadhar, Jog Singh and Dr. CKG Nair of SAT said in their order dated May 12,2017 after hearing held on March 08, 2017.
The Bench stated, that “the PCL transferred these investments to other schemes but gave a false affidavit that investors have voluntarily switched over to the non-refundable schemes. This was an attempt to deprive the investors of benefits which were originally promised by the company under its earlier schemes.”
The bench upheld SEBI’s order that PCL is a CIS and needs to be wound up and directed PCL to refund investors’ money within three months. However the PCL did not refund the investors’ money. Its office located at Kalyandas Udyog Bhawan, Prabhadevi in Central Mumbai, was closed down by SEBI in May 2017.
Economic Offences Wing
Besides SEBI’ action, one of the investors- Narendra Vataukar( a resident of Dadar) lodged a complaint against PCL for cheating him of Rs 40,000 on December 10,2017. Besides, 82 other investors approached the Economic Offences Wing (EOW) of Mumbai Police. The EOW registered a case on February 28, 2018, against the PCL under the Indian Penal Code (IPC) and also invoked provisions of the Maharashtra Protection of Interest of Depositors (MPID) Act 1999.
Confiscation of property
Subsequently SEBI attached 34 properties and froze 250 accounts of the company and its directors. The then Maharashtra Chief Minister Devendra Fadnavis told the Maharashtra Legislative Council that PCL’s property worth Rs 4500 crore (SEBI-Rs 3000 crore, Rs 1500 crore EOW) was confiscated and the action against its directors will be taken soon.
PCL’s properties
PCL’ properties are spread across India including Maharashtra( Mumbai, Navi Mumbai, Thane,Pune, Satara, Chandrapur), Goa, Gujarat, Rajasthan, Madhya Pradesh, Karnatak, Kerala, Tamil Nadu, West Bengal, Haryana and Uttarakhand.
Depositors approach the court
Investors were organised under the umbrella of the Action Forum Charitable Trust (IAFCT) to get their money back. The IAFCT on January 10, 2019, filed a petition in the Bombay high court, alleging that the SEBI had undervalued PCL’s assets while fixing their reserved price for the auction. In response to the petition, the bench comprising Justices B P Dharmadhikari and Revati Mohite-Dere restrained SEBI from auctioning PCL properties and directed it to file reply to the petition.
Vishwas Utagi, a member of IAFCT said that although the argument that SEBI undervalued the properties was correct, the decision to approach the court to stop the auction of PCL properties was erroneous. The court’s direction has put a total stop to the sale of properties.
Dnyaneshwar Darvatkar, the founder president of Rashtrashakti Organisation, spearheading the cause of PCL investors said that some of the hurried actions of Mumbai group of investors were not very correct due to which the entire recovery movement has come to a standstill.

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