Investors in CIG Realty Fund have moved the Securities Appellate Tribunal (SAT) against the trustees of the fund citing alleged breach of contract that caused them “grave inconvenience”.
Essentially, the applicants before the SAT are those who invested in schemes I, II and IV offered by the fund. It was set up in August 2005 and registered with the Securities and Exchange Board of India (Sebi) as a venture capital fund in December 2005. Investors have collectively invested approximately ₹650 crore across all schemes.
In their plea filed before the tribunal last week, the investors alleged that the schemes were wrongfully extended beyond the permissible time, leading to breach of contract, causing “grave inconvenience” to the investors.
“The fund has clearly made a mockery of the trust and faith invested by the applicants along with other investors,” investors said in the plea cited earlier. “The trustees have failed to maintain the integrity and highest standards expected, particularly in not ensuring proper care, due diligence and independent professional judgement in winding up the schemes.”
A real estate fund, with corpus typically pooled from retail investors, invests in securities of real estate companies.
A copy of the petition was seen by Mint.
In December 2023, Sebi had passed an order against Unitech Advisors (now known as Auram Asset Management) — the fund manager to the realty fund —, its directors Sanjay Chandra, Ajay Chandra, Ramesh Chandra, and Hitendra Malhotra. Others named included the present trustees of CIG Realty Fund Anil Harish, Vijay Tulshyan, Mahesh Kumar Sharma, and Rakesh Dhingra. The regulator had asked them to wind up the schemes of the fund by providing exit to its investors within six months.
This comes a couple of months after the trustees too challenged the Sebi order.
Barred from new assignments
These trustees were fined ₹10 lakh each and barred from taking new assignments as trustees of Alternative Investment Fund (AIFs) of any category for one year. Sebi had also imposed a fine of ₹1 crore on Unitech Advisors.
The regulator found that nearly 80% of the corpus from CIG Realty Type IV fund was invested by Unitech Advisors in associate firms, violating Sebi’s venture capital fund regulations.
The plea added that there was a “breach of confidentiality and transparency” regarding information relating to the AIF, its investors and investee companies. Such actions, the investors said, not only constitute a deviation from stipulated professional conduct but also raise concerns about the trustees’ commitment to transparency, ethical practices and fiduciary responsibilities.
Queries sent to the investors’ counsel Pavan Rajpal remained unanswered till press time. Trustees of CIG Realty Fund could not be reached for comment.
Complaints galore
In fact, Sebi had received several complaints against CIG Realty Fund between May 2011 and January 2022. These complaints pertained to three schemes—CIG Realty Fund Type I, II, and IV—that made investments in the real estate sector through various Indian companies, as per Sebi’s order in December.
The complaints pertained to various issues including the extension of scheme tenures, non-liquidation of schemes, non-receipt of invested funds, fraudulent activities, and underperformance of the CIG Realty Funds.
Following these complaints, the regulator started an investigation into the book of accounts and other records of CIG Realty Fund between April 2019 and March 2020.
The matter will be taken up by the tribunal on 26 July.
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Published: 26 May 2024, 05:06 PM IST