NRI investors say ICICI 'misled' them

October 29th 2014: A group of 69 NRI investors, who moved the Mauritius Supreme Court against ICICI alleging losses of their investments in Dynamic India Fund lll (DIFIII), claimed that the Fund CEO and managers misled them by showing and assuring huge gains through investment in world class real estate properties in cities across India showing good prospects.

The investor group, is part of over 500 people to subscribed to DIF lll, aid ICICI failed to communicate to them about the role of DIFlll and its constitution, floated in April 2005 when ICICI Bank and ICICI Venture approached the NRI investors located in more than 28 countries, including the United Arab Emirates, Kuwait, Qatar, Bahrain, Oman, USA, UK, East Africa and Singapore, Hong Kong, Gibraltar, British Virgin Islands and Japan.

The investors were misled to subscribe to DIF lll based on the performance and returns of the previous successful fund ' DIF ll, which ICICI claimed to have outperformed their estimate. Investors were lured into investing in DIF III which they promised was managed by a very experienced team of real estate experts, the petition alleged.

Some investors started raising concerns to ICICI Venture and ICICI Bank about the lack of progress of DIF III in early 2011, nearer to the exit time of projects. Subsequently, following the scam exposed by Operation Red Spider in 2013 against ICICI Bank, some investors filed further complaints with ICICI Venture and ICICI Bank, IFS and DIFIII. Numerous discussions were held with representatives of ICICI Venture and ICICI Bank about the dismal performance of investments of DIF III but turned out to be cover up of the wrong doings of the management, the petitioners said.

'The investors discovered from the discussions that DIF III was simply an off-shore feeder fund receiving money in US Dollars and transferring to India for investments in projects. ICICI entrusted India Advantage Fund III (IAF III), for execution of the projects of DIF III. IAF III fell under the administration of ICICI Venture. Also, the investors later discovered that DIF III was only a minor shareholder in each and every investment in the portfolio such that the investors were simply deliberately misled and ill informed at the time of promotion that ICICI was fully single entity of DIF III investment.

'Time and again, the investors queried DIF III and/or IFS and its employees/representatives about the management of DIF III, the investments carried out but the answers obtained were either evasive and incomplete or untrue devoid of transparency and accountability,' the investors claim.

Prior to 2013, the investors as shareholders of a limited company never received any communication from DIF III and/or IFS concerning any annual meetings, resolutions passed, audited accounts or special meetings held of shareholders as required by laws of Mauritius. It was only on September 2013, that IFS sent a notice of Annual Meeting while in March 2014 another notice for a special general meeting to be held in April 2014 was sent whereby ICICI Venture proposed, firstly, to extend the period of IAF III until 14 April 2017 to ensure an orderly exit from the residual portfolio of IAF III and secondly, a structured liquidity option of low NAV of extreme loss to the investors in DIF III.

The conduct of the board of directors as well as ICICI Bank and ICICI Venture during the Special General Meeting held on 14 April 2014 was a shamble and resulted in the discovery of multiple and serious breaches in the management and investment of DIF III, the investors alleged.

The marketing executives gave false impression that ICICI Bank was itself exclusively the investor of the Fund. It was this trust in ICICI Bank, being leading private bank of India that the Investors relied upon. Investors later discovered that DIF III had only minor shareholding with developers, promoters and financiers holding the reins. Investors emphatically claim that had they been told of DIF III to be a minor share holder then they would under any circumstance not considered it.