But even those who have heard the story of the debacle of Golden Forests India Limited (GFIL) and its empire of over a 100 companies may not know that PGF Limited and Pearls Agro Corporation Limited (the two companies under the Sebi and CBI scanner now) not just worked on the same business model but has the same set of people behind it.
R K Syal, the man behind the meteoric rise of the GFIL and Nirmal Singh Bhangoo, who heads the Pearls Group empire, had put their heads together in the early 1980s chiseling the land for investment business for themselves.
Syal was an assistant manager in Chandigarhs tourism department and Bhangoo was struggling with his dairy farm in the village. Some say both were working for Peerless, a general finance company, as part time agents then.
Two separate versions are available of what happened next. While Syals associates say that Syal and Bhangoo started Pearls General Finance Ltd in 1983 gathering investment from people promising to multiply their money, with land units as guarantee, Bhangoos associates say Syal only worked for the company.
It was Syal who gave the idea of having land units as security in lieu of investments. His idea was that the increasing cost of the land or development on that land would continue to pay for the dividends to the investors. PGF was set up by Bhangoo, Syal and one Vidya Sagar. Later Vidya Sagar and Syal started GFIL. Vidyasagar died in an accident, recalled a close family associate of the Syals who requested not to be named.
In 1985, Syal and Bhangoo parted ways and Syal set up GFIL in 1987. In 10 years, Syal turned GFIL into a 100 company empire, run from just two shop-cum offices in Mani Majra. He made his kin head major companies buying 10,000 acres of land and other commercial properties around the country.
The companys website says that GFIL was set up with a simple yet amazing concept of economic freedom for all where every investment made in the company was secured in the shape of land units which were allocated to each and every investor. In case of any lapse of maturity the investor had the right to get that land unit transferred in his/her name. This system of land units was so revolutionary that not only everybody understood it but also everybody trusted it, states the website.
Working on the same idea, Bhangoo changed the name of his company from Pearls General Finance to Pearl Green Forest Ltd in 1988 and then to PGF Limited in 1997. Sebis report on PGF given in 2002 says that this was done following tightening of regulatory norms relating to NBFCs and collective investment schemes by RBI and Sebi respectively.
Sebi set its eyes on GFIL and PGF in 1997 insisting on them following Sebi guidelines and declare themselves as Collective Investment Schemes. Both companies resisted the move and challenged Sebi in courts.
However, despite Sebis clampdown, while PGF continued to flourish with Bhangoo setting up an empire worth several thousand crores, the Syals met a different fate.
While Sebi and GFIL company were fighting it out in the court, Punjab vigilance bureau swooped on the Syals for cheating and violation of the Land Ceiling Act arresting and jailing almost the entire family in 2000. Syal and his family were booked in several cases after the companys bank accounts were frozen and the company started defaulting on payments to investors. Syal, his father and his wife died while in the jail. When the company was wrapped up in 2000, it had 25 lakh investors who had to be paid back.
Nikhilkant Syal, son of R K Syal writes on the companys website, My family has been fighting this legal battle for over 12 years and in the course of this struggle, 3 members of my family have laid down their lives and even though their tremendous loss cannot be described in words, the next generation of the Syal family along with the support of all our 25 lakh investors and 3 lakh team members will now take up this fight as our duty. I believe from the core of my heart that Golden Forests India Limited can easily pay off all its liabilities with interest.