CHANDIGARH|NEW DELHI: In just over 30 years, Nirmal Singh Bhangoo, the man behind Pearls Agrotech Corporation Ltd (PACL) which has been asked to return Rs49,000 crore to its investors by Sebi by November this year, has metamorphosed from a milk seller near the Attari border in Punjab to the owner of 1.83 lakh acres of land around the country.Bhangoo’s story is similar to that of Sahara group’s Subrata Roy. Both run business empires whose functioning, critics say, is opaque. They rub shoulders with politicians and filmstars; have real estate projects and own hotels and make no bones about their wealth. Roy has hotels in New York and London. Bhangoo has bought a hotel in Australia’s Gold Coast and has built hundreds of homes in Brisbane.Both have interests in sports—PACL has sponsored IPL teams and Kabaddi tournaments, while Roy sponsored the Indian cricket team and owned an F1 team and the Pune team in the IPL.Both run news channels and their businesses are in the hands of a few trusted men, mainly family members.The Sahara chairman is currently behind bars, and has been asked to return Rs24,000 crore (nowRs37,000 crore with interest) to investors. In the coming months and years, PACL’s promoters may face a legal battle to avoid a similar fate. Bhangoo has battled the stock market watchdog’s jurisdiction for 16 years while building a conglomerate of considerable size. The crux of Sebi’s case is that PACL is a collective investment scheme (CIS) that ought to be shut down.Last week, Sebi asked the company to returnRs49,100 crore to its investors within three months and initiated proceedings against the company and its promoters for unfair trade practices and for violating regulations on collective investment schemes (CIS) following a Supreme Court order last year. It also barred them from raising any more money.Bhangoo, 61, is said to be close to several politicians— cutting across political lines. He is closely associated with a former Congress MP from Punjab as well as senior BJP and Shiromani Akali Dal leaders who are now in power.One of his trusted aides and a director in PACL, Subrata Bhattacharya, first agreed to speak to ET on the issue after discussing the matter with lawyers. Later, he did not take calls and asked the company’s PR agent to send out a statement, which read: “PACL limited, in its submission to the Honourable SEBI bench had submitted that it is not running a CIS. Further, the company has sufficient asset holdings vis-a-vis the money raised for its real estate business. SEBI has unfortunately failed to recognize the submissions of the company that it can’t be treated like a CIS. The company would now appeal this order before the Securities Appellate Tribunal.” The statement also had a message for its investors.“PACL limited would also like to remind its customers that it has always kept their interest paramount and would continue to do so. We assure our customers that their investments are safe & their interests would not be jeopardised.”Some of the 30 lakh agents who have been working with PACL for 6-7 years, said that they are getting calls from nervous investors wondering if their money is safe. But so far the bubble hasn’t burst. “We have been able to convince them that their money is not lost. We are keeping our fingers crossed,” Raju, an agent from West Delhi, said.Another broker Suresh, said that the company has never defaulted on payments with his clients, and has instead paid interest whenever there has been a delay.But they are struggling to keep the worried investors calm. Some investors have been taken to PACL offices so that they can see for themselves that PACL has not downed shutters. Some have met senior executives to allay their fears.The company’s business model isn’t very complicated. It collects money from investors through a huge network of agents spread across the country and invests in cheap land which is likely to see changes in end-use soon. “Here his political connections helped,” said one agent who has worked with the company for six years. He did not want to be named.Once the change in regulation happens, the cheap land appreciates in value enabling the company to monetizes it, The company pays investors 12.5% interest per annum on the money they invested. Alternatively they can be a plot of barren land at a random location chosen by the company.“Even after returning money to investors, the group is still left with huge cash,” says an insider.Bhangoo had set up PACL in 1996 and because there were no rules in place at the time and was able to collect a huge amount of money from investors. His haul was estimated at about Rs20,000 crore before Sebi came up with regulations on CIS.While a major chunk of his business involved buying and selling land, PACL also develops real estate projects in the commercial and residential space. It has executed projects in Noida, Delhi, Mohali and has several underway as far as Kochi, Madurai, Vadodara, Pune, Mumbai, Lucknow, Zirakpur and other parts of the country. In Bhatinda, it is building a 250-acre residential township.Bhangoo, though, isn’t new to run-ins with regulators. He had set up a company called Pearls Golden Forest (PGF) in the 1980s—one of those companies that collected money from investors for plantations, and just like PACL, offered handsome returns.PGF and PACL co-existed in the 90s, though after the CIS regulations came into being in 1997, Sebi started questioning companies running such operations. PACL challenged the jurisdiction of Sebi saying that “its transactions are in the nature of sale and purchase of agricultural land and thus outside the purview of the securities market.”Both companies also filed writ petitions challenging Sebi’s intervention—PGF with the Punjab High Court and PACL with the Rajasthan High Court. While the court in Punjab found PGF to be a CIS and asked it to be closed, PACL was luckier. The Rajasthan court held in 2003 that the schemes of PACL were not CIS. This came just after a report by Delhi High Court appointed Justice K Swamidurai found PACL’s transactions with customers to be genuine.The Supreme Court, however, recently set aside the High Court order, which became the basis of Sebi’s order against the company. Even the CBI recently swung into action, registering a case of criminal conspiracy and cheating against Bhangoo, PACL, PGF and their directors.When ET called Bhattacharya on Monday, he said he was at the CBI office and would call back in the evening. He did not.PACL seems to have sensed approaching trouble. Sources said it has been trying to sell land in Chandigarh and in the Ludhiana-Jalandhar belt over the last few months, but has not been successful because of the slow economy.So far, the man who in his younger days sold “surplus” milk produced by the family’s cattle, along with his elder brother Nachattar Singh at Bela village in Attari, near the Indo-Pak border, has been able to milk small investors as well—a trick he is said to have picked up from Peerless, a finance and investment company he worked with in Kolkata in the late 1970s, which too had been embroiled in battles with regulators.“His strength is his political clout,” says one person who knows him closely. “He likes to maintain cordial relations with everybody,” adds a senior Punjab politician. Both requested they not to be named. In recent years, as his friendship with politicians strengthened and his empire grew, some of his investments became more visible, and his links became apparent bringing both Bhangoo and his business under the spotlight.Over the last four years, the Pearls group has put in over Rs35 crore for sponsoring a Kabaddi tournament. Pearls Group runs the P7 television news network, which has been used effectively to promote its schemes and also has interests in tourism, spices, construction and education. In 2011, it had also sponsored the back of the shirt of the Kings XI Punjab IPL team and had engaged star Australian pacer Brett Lee as a brand ambassador to promote its Australian hotel. Last year, it had signed a three-year deal to sponsor the Super Fight League on ESPN and the Golf Premier League. The group has six active directors—Sukhdev Singh, Rajeev Gupta, Tarlochan Singh, Gurmeet Singh, Subrata Bhattacharya and Gurjant Singh Gill. Sukhdev Singh, the managing director, is a relative of Bhangoo. So is Tarlochan Singh. Bhattacharya has worked with Bhangoo for a long time and used to look after the accounts of his companies.