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12
May 2017
The Securities Appellate Tribunal (SAT) has upheld an order of the
Securities and Exchange Board of India (SEBI) that Pancard Clubs Ltd (PCL) is a
collective investment scheme (CIS), which needs to be wound up and the Rs7,035
crore that the company had collected, should be refunded to investors across
the country. The Total Investment &
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"In our considered view, the argument put forth by PCL fails to
take away from the fact that the share capital of the Company stands at a
meagre Rs50 lakh, while the money mobilized under their holiday scheme is over
Rs7,000 crore. Further, investments to the tune of over Rs1,000 crore have been
made towards acquiring hotels and resorts, thereby expanding their inventory of
properties on offer in the holiday scheme by utilising the proceeds of the impugned
scheme. Needless to say that the corpus of money accumulated by PCL by way of
contributions to the holiday scheme is well above the limit of Rs100 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 CIS," the Bench of Justice JP
Devadhar, Jog Singh and DR CKG Nair said in its order. The Total Investment & Insurance
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The
Bench further stated, "...the appellants transferred these investments to
other schemes but have given a false affidavit that investors have voluntarily
switched over to the non-refundable schemes. This seems to be an afterthought
manoeuvring by the appellants with a view to deprive the investors of benefits
which were originally promised by the appellants under the earlier schemes
which in fact govern the relationships or obligations and
entitlements".
Four
intervention petitions were filed before the SAT. The Interveners, contended
that they were doubtful of whether the PCL would be able to repay all its
investors the amount of about Rs7,035 crore. PCL has disposed of its assets to
repay investors disregarding several conditions that were to be complied with
as put forth by SEBI before such disposal, the interveners argued.
They
further contended that PCL had failed to submit details of their property to
SEBI in time and it is on persistence by SEBI that they belatedly supplied
truncated details casting doubt upon the genuineness of the appellants’
intentions, through advocate Rabindra Hazari.
"The
Interveners through their miscellaneous applications have brought on record,
though belatedly before this Tribunal, instances where the original receipts
and the other documents of the investors were collected by the appellant company
leaving the investors high and dry even without the documents. Mr Hazari has
shown us many documents to bring home his points. The additional documents
which the interveners wanted to bring on record were not produced before SEBI
while the proceedings were going on for many years. However, Mr Hazari has
fairly submitted that he would fully support the SEBI order so that the
interest of all investors in the appellants’ various schemes could be protected
effectively and since we are going to dismiss the appeals by upholding the
order of SEBI, all these intervention applications shall, accordingly, stand
disposed of," the SAT Bench said.
Earlier
in November 2015, the SAT had asked Pancard Clubs to immediately repay
investors who had filed the intervention application. During the hearing Fredun
Devitre, Counsel for SEBI, complained that PCL was deliberately avoiding and
evading order issued by the market regulator on 29 February 2016, inter alia,
to provide full inventory of all the assets and details of properties held by
PCL's directors by making bald references to "Bungalow at Versova,
Mumbai", and "5 Star Property at Pune" without disclosing any
specific particulars whatsoever. The SAT Bench then had warned PCL that such
deliberately incomplete disclosures are evidence of bad faith and further fraud
by the company and its directors.The
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