New Delhi-based Pearls Group - GC's Sheraton Mirage owners - caught in alleged property ponzi raid
Pearls Group, the New Delhi based property group has been again accused of allegedly duping Indian investors by promising agriculture land in a so-called $10 billion ponzi scheme.
The India CBI last month registered a case of criminal conspiracy and cheating under Sections 120B and 420 of IPC against Pearls Group managing director Nirmal Singh Bhangoo, his two companies Pearls Agrotech Corporation Limited (PACL) and Pearls Golden Forest Limited (PGFL) and their director Sukhdev Singh.
The CBI claimed the documents recovered by it during searches at the premises of Delhi-based business groups PACL and PGF show they allegedly used ponzi scheme to cheat nearly five crore investors of Rs 45,0000 crore.
It is an associated New Delhi-based Pearls Group that paid $62 million for the Sheraton Mirage in 2009. It was the Christopher Skase-built resort on Queensland's Gold Coast. The company has recently been the lead sponsor of IPL team Kings XI Punjab and hired Australian pacer Brett Lee as the brand ambassador.
The case was registered on February 22 this year in the Supreme Court.
"Investigations have revealed that Bhangoo's companies raised investments from over 5 crore gullible investors through collective investment scheme under the garb of sale and development of agricultural land," said the CBI statement.
The companies were found to have raised investments by issuing bogus land allotment letters to induce the investors, it alleged.
A CBI spokesperson said that on the direction of the Supreme Court, the agency undertook an inquiry to look into “allegations of collections of huge deposits form public at large” by the promoters and directors of the two companies “by running pyramidal schemes under the garb of allotment of agricultural land to depositors”.
"The raids had led to recovery of huge records and data relating to deposits from public and their misutilization and diversion of funds, besides other incriminating documents," CBI spokesperson Kanchan Prasad said.
Nirmal Singh Bhangoo, 57, the former dairy farmer founded Pearls in 1983 and under his guidance it has become one of India’s fastest growing firms and among its largest private landholders.
Headquartered in New Delhi, Pearls leads the Indian property sector, with a strategic land bank of agricultural, semi-urban and urban parcels totalling more than 1.5 million acres, which is being developed by the firm’s real estate and construction arms.
Some 1,000s of accounts across 35 banks had been frozen in recent weeks, Indian newspaper reports noted, although the origins of the case go way back to 2002 when Securities and Exchange Board of India (Sebi) had first cautioned the company against not following the proper rules pertaining to their investment schemes launched during that period.
During past legal conflict between PACL and the SEBI company executive Subrato Bhattacharya indicated the company "will obey the law and follow whatever instructions we received."
The company had filed a petition with the Rajasthan High Court which granted relief by repealing Sebi’s earlier order. But a 2012 judgement regarding the conduct of 33 unrelated companies into the practice appears to have triggered the latest investigation and raids.
The oneindia.in website drew a link to Pearls Australian assets noting "the investments made by the company in a hotel in Gold Coast, Australia, have also come under the scanner of CBI."
Pearls Australasia is an Australian-based company, launched by New Delhi-based Pearls Global to pursue strategic opportunities throughout Australia, Asia, and the Pacific.
It undertook a $20 million refurbishment of the Gold Coast’s Sheraton Mirage Resort in an overhaul of the five-star resort’s 296 rooms along with its common areas and restaurant and bar facilities – and was then promoted in India by cricket star Brett Lee.
Pearls announced plans to build the $75 million Edgewater residences and apartments on Lake Orr at Delfin Lend Lease’s Varsity Lakes.
It had also entered a joint venture with David Devine’s Metro Property Development to develop three high-rise residential towers in Brisbane and two land subdivisions on the northern outskirts of Melbourne.
In 2011 in Sydney, Nirmal Singh Bhangoo was honoured for his contribution to the Australia India relationship at a gala awards night at New South Wales Parliament House, hosted by the Australia India Business Council, where his family accepted the award on his behalf from NSW Premier, Barry O’Farrell.
Photo: The son and daughters of Nirmal Singh Bhangoo accepting an honor on their father's behalf from NSW Premier Barry O'Farrell in June, 2011.
In 2012 it was reported the billionaire entrepreneur Nirmal Singh Bhangoo applied for an immigration visa to spend more time in Australia.
The reports on the investigation suggested the CBI had initiated an inquiry into the matter on the direction of the Supreme Court. The agency was asked to inquire into the allegations that huge deposits were raised from the public and misutilised.
It reported the Indian Securities and Exchange Board of India had raised concerns over legality of PACL's operations since it was running a collective investment scheme in the garb of a real estate company.
Founded in 1996, PACL reportedly saw stupendous growth in just a few years of its existence, with its deposits exceeding Rs 20,000 crore.
The money was collected by the company as investment from various depositors and later used to buy land across the country – almost 1.85 lakh acre as reported to the Registrar of Companies. The company allegedly managed to lure customers who would then become its agents by promises like “double your money in six years."
The CBI agency is also probing the records of World Kabbadi Cup tournaments which were sponsored by Bhangoo's companies between 2011 and 2013.
The company also holds broader interests in infrastructure and construction, the media, film production, education, health care and hospitals, agriculture, food and alcohol distribution and insurance. It holds the exclusive rights to VB and Wolf Blass in India.
Pearls Australia executives have been asked by Property Observer for comment. A spokesperson for Pearls Australasia indicated Pearls Australasia is an Australian company that is managed and operated in Australia locally by an Australian team of executives.
"Pearls Infrastructure Projects Limited (PIPL) is a passive shareholder in Pearls Australasia.
"It should be noted that PIPL is not the subject of recent media articles," the spokesperson said.