Close on the heels of a group of 69 NRI investors moving the Mauritius Supreme Court against ICICI entities, nine more joined them and filed a complaint with the market regulator SEBI pleading for an investigation into the alleged mismanagement of the Dynamic India Fund lll and lV.
Gulab Patil, Dubai based investor said, ''A complaint has been filed at the Securities Exchange Board of India (SEBI), Mumbai by a group of 78 investors, mainly Non-resident Indians and Persons of Indian Origin, requesting SEBI to investigate ICICI Venture Funds Management Company (ICICI Venture), ICICI Bank, Dynamic India Fund III (DIF III), Dynamic India Fund IV (DIF IV), India Advantage Fund III (IAF III) and India Advantage Fund IV (IAF IV), citing the provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulation 2003.''
DIF III and/or DIF IV schemes, which are Mauritius registered limited life companies, were launched and promoted by ICICI Venture and ICICI Bank. These schemes have been structured as feeder-funds by ICICI and are registered with the SEBI as Foreign Venture Capital Investors. As a feeder-fund, DIF III has invested solely in IAF III. Similarly, DIF IV has invested notably in IAF IV and directly in one of the projects from IAF III/IV portfolio. IAF III / IV are registered as a Venture Capital Fund with SEBI and has investors other than the DIF III and IV. DIF III, IV, and AIF III, IV have been promoted by ICICI Bank and ICICI Ventures.ICICI Venture is the investment manager of both the IAF funds.
These funds were launched in year 2005. The expected life of the funds was 7 years. In spite of 9 years after the start of these funds, the funds have still not substantially exited its investments. Initially extended by two years beyond its expected life of 7 years, the funds have recently in April, 2014 been extended by another three years.
In or about April 2005, ICICI Bank and ICICI Venture approached investors, located in a number of countries including the United Arab Emirates, Kuwait, Qatar, Bahrain, Oman (GCC countries), USA, UK, East Africa and Singapore, Hong Kong and Japan to invest in its project which consisted of the launching of a dedicated real estate fund, called the India Real Estate Fund. The Fund was promoted to be a close-ended fund with a corpus of USD 220 mm and the Fund was to have the primary objective of developing, leasing, owning and selling quality office buildings, residential premises and retail spaces that were attractive to quality tenants/users and appeal to long term institutional investors. The Project was marketed mostly using the name and prestige of ICICI Bank and promotional campaigns for the marketing of the Project was personally effected by the top management team of ICICI Bank. The promotion of DIF III relied heavily on the exceptional returns of a similar fund, DIF II, which were used as a benchmark for future performance potential.
Induced by the abovementioned representations made by ICICI Bank and ICICI Venture, the investors invested into the Fund. At the time of signing up to invest into the Fund, they were typically asked to endorse a one page signature page, which was presented as being a subscription agreement. It was only in 2013 that they became aware that the documents signed by them were merely signature pages of the subscription agreements. They were also given to understand that there was another document referred as Private Placement Memorandum. The investors realized the importance of these documents only when ICICI began to cite the provisions of these documents to dismiss the grievances of the investors.
As from 2011, some investors started raising concerns to ICICI Venture and ICICI Bank about the lack of progress of DIF III. Following the scandal of Operation Red Spider in 2013 against ICICI Bank, some investors filed further complaints to ICICI Venture, ICICI Bank and DIFIII and discussions were even held with representatives of ICICI Venture and ICICI Bank about the investments of DIF III. Frustrated by what they allege to be evasive responses by the ICICI group companies, some investors even went on to file complaints via SCORES - SEBI’s online investor grievance redressal system. As none of these attempts lead to the investor grievances being resolved to investors’ satisfaction, the group of investors have now sought investigation by SEBI through a written complaint. The investors filing the complaint are but a part of a large group of investors (estimated by the complainants to be more than 600) potentially affected by the alleged misconduct in selling and managing these two schemes, and therefore, investors have in their complaint urged SEBI to act in the larger interest of all the DIF III & IV investors.
In their complaint to SEBI, the investors have sought investigation by SEBI into allegations of misrepresentations, concealment and omission of material facts, misleading statements, negligence, and breaches of duty towards the investors by not exercising care and due diligence while managing their investments by the said ICICI companies. The Investors are of a view that these misconducts have diminished the value of investment considerably if not in its entirety. The investors are therefore claiming to the SEBI that ICICI Bank and ICICI Venture have committed fraudulent and unfair trade practices which ought to be investigated by SEBI under its various regulations.
