Companies & Sectors
Kotak dupes investor of Rs2.27 crore through bogus claims

The wealth management arm of Kotak Mahindra Bank misled a customer into investing in its India Growth Fund at a steep premium, based on bogus claims. Kotak officials remain impassive even as the investor struggles to find buyers

It seems that customers everywhere are paying a hefty price for their blind trust in companies with strong brand images. Citibank claims it had no inkling about the Rs400-crore fraud played out by one of its employees on unsuspecting clients. Now, a customer of Kotak Mahindra Bank has learnt a harsh lesson after reposing unquestioning faith in the brand he trusted so much.

In a shocking incident, a high net-worth client of Kotak Mahindra Bank was hustled into buying a dud product for a whopping sum of Rs2.27 crore, with the bank pocketing a cool profit of Rs1 crore in the process. The wealth management arm of the bank allegedly misled the investor into putting the money in its India Growth Fund, based on bogus claims regarding its worth and taking undue advantage of the brand name to influence the buyer. The investor's repeated pleas to rectify the damage have fallen on deaf ears as Kotak officials refuse to budge.

The investor, Rajan Manchanda, had in June 2007, invested large amounts in two of Kotak's funds-Biotech fund and Realty fund. Mr Manchanda was given a detailed presentation for both these funds and he gave his acceptance to make the investments. Mr Manchanda also assisted Kotak in getting equivalent investments from his cousin for these two funds. Kotak zeroed in on him again to sell him another product-India Growth Fund.

Mr Manchanda was allegedly misled into investing in the fund by making bogus claims about its worth. Claiming that the fund was being sold to him by another investor in a distress sale at an attractive discount, the Kotak official made a strong pitch in favour of the fund. Although the investor had some reservations, he was persuaded into buying it, saying there was a rush of investors wanting the product while it was available at a discount. Kotak collected Rs2.27 crore from Mr Manchanda, who was under the impression that he was getting the fund at a discount to its value of Rs2.5 crore.

"I told him I had already made huge commitments in the two funds and would like to avoid further commitment. He insisted that I trust him and would not regret as three to four companies were going public in the next 12 months and that would more than take care of the amounts payable for the two other funds. He wanted a commitment immediately or else I would lose out. Upon his assurances and insistence I agreed to invest," said Mr Manchanda, describing his situation.

Curiously, Mr Manchanda was asked to make out the cheque in favour of Kotak Mahindra Prime Ltd, the car financing division of Kotak, and not the seller of the fund. He was told that this was due to certain 'technicalities' involved in the transfer of the fund and that Kotak was not benefiting in any way but only facilitating the transfer. He was repeatedly told that the premium on the distress sale had been paid to the seller of the fund. Surprisingly, the investor was not issued any agreement letter, despite assurances to that effect. Neither was he given any valuation report. Mr Manchanda lost trust and requested the officials to sell all the three funds. Kotak officials, however, kept on assuring him that the funds would be sold and that he should bear with them as the markets were bad.

Sensing foul play, Mr Manchanda approached the Chennai-based seller of the fund in October 2009 and found that he had been taken for a ride all along. Apparently, the seller was paid only his contribution of Rs1.25 crore, minus Rs6 lakh collected by Kotak. Mr Manchanda realised that Kotak had betrayed the trust he had reposed in them and that Kotak had fraudulently dumped onto him a worthless investment at a steep premium. It is obvious that someone at Kotak has made off with a cool Rs1 crore in the process.

Mr Manchanda also tells us that the Realty fund was sold by Kotak on his behalf at Rs1.01 crore, against his investment of Rs1.47 crore. He had to bear a loss of Rs46 lakh on the investment. Apparently, the fund was valued at 1.2 times the investment but sold at a 35% discount to the actual investment. The Biotech fund, supposedly valued at twice the investment, cannot find a buyer, claim Kotak officials. The India Growth Fund is also failing to attract any buyers.

The investor now finds himself in a deep hole as his repeated attempts to get the attention of the top authorities at Kotak have taken him nowhere. Shockingly, every time he finds himself being redirected to the very people who sold him the fund in the first place!

Only recently did the investor get a reply from the wealth management arm on behalf of Uday Kotak, stating that he was not duped in any way. Even Moneylife's attempts to get answers have not yielded any response yet.

The investor has also lodged a complaint with the Securities and Exchange Board of India (SEBI), but has not made any progress here too.

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COMMENTS

Suiketu Shah

4 years ago

I would like to share with moneylife and its readers how much "wealth management managers" are becoming outcasts in our society.

In posh South Mumbai one MBA was working for a private banks wealth management team.She has cheated,fooled and defrauded almost everyone she knows-relatives,friends,neighbours,etc almost everyone with mfunds in 2007 at sky high price--all in her quest to make commission for her bank and herself.

The result-she was thrown out of her bank in 2008 and nowadays wherever she goes out -be a restuarant,club,outing etc she checks who is in that restuarant(even before having a seat) and is someone familar is there,she flees that place immediately!!!!!!

The day is not far away where most wealth management companies will be considered socially as outcasts as criminals.Keep running for yr lives fraud wealth managers!!

vipul

4 years ago

I HAVE LOST 20 LAKH RUPPES ON STOCK INVESTMENT BASED ON KOTAK SECURITIES RECOMMENDATION.HOWEVER THE COMPANY IS A FRAUD AND HAS SHOWN DUBIOUS RESULTS AS CLAIMED BY ITS OWN SENIOR EMPOLOYYES..I HAD THE GONE TO THE COMPANY AND FOUND FROM THE EMPLOYEES OF ARSHIYA WORKING WITH FINANCE AND COMPANY SECRATARY DEPARTMENT THAT THE COMPANY IS REAL FRAUD NAD THEY HAD ASKED SAMEER ARORA OF HELIOS CAPITSL KOTAK SECURITIE AND EMKAY STOCK BROKER TO PUBLISH GOOD RESEARCH REPORT FOR THE COMPANY AND THE REPORTS WERE MADE BY THE ARSHIYA EMPLOYYES AND GIVEN TO THESE BROKERAGE...
NOW KNOWING THAT I HAVE BEEN DUPED OF MY MONEY CAUSE OF CRIME COMMITED BY KOTAK SECURITY ANALYST I HAD PUT UP A COMPLAINT TO MR UDAY MITTAL ..BUT I WAS TOLD THAT HE DOES NOT LOOK INTO PERSONNEL ISSUES . VP OK KOTAK TOLD ME THAT HE CAN ONLY BE SORRY FOR THE MONEY I HAVE LOST BUT HE CANT REFUND MONEY CAUSE OF COMPANY POLICY.

PRM

4 years ago

Mr Manchanda,
What I have learnt is that for many days your complain was not heard and dealt professionaly. Your emails were also not acknowledged.

But finally one day you got your money how. How ? What was the process followed by you can you please tell. This will be of great help to others.

Mr Manchanda, I am also very curious to know did they force-sell you scheme and pushed heavily to invest just like street side sales men pushing for credit cards ?

When they told that they want the chq to credited to so an so name not even once you hesitated or refused for the same ?

Finally,didn't you confirmed the overall investment scheme from seniors of the bank.

Please do make an effort to tell how did you finally recieved the moeny.

REPLY

240p FLV

In Reply to PRM 4 years ago

Hello, PRM

Please also reveal your intention about asking all these questions now. What is it that you are trying to establish?

Rajan Manchanda

In Reply to PRM 4 years ago

Gentleman,
The issue was resolved in Jan 2011,and now is nearly two years old.I can only say Money was recovered with the untiring efforts of Ms.Sucheta Dalal. All other actions with various departments did not help.Keep reading Moneylife and attend the seminars to keep yourself updated.No point in going into my past history of misinvestments.

PRM

In Reply to Rajan Manchanda 4 years ago

@FLV,
Although this issue is old I came accross this issue recently.
My intention:we learn from other's sucess and failure and accordinly was interested and somewhat curious in knowing how the investor got back his money considering the hardships he underwent.For example. many emails sent by him were not even being replied.

@Rajan,
We learn from history and for this reason I was trying to understand ur case.

Now, I have got answers to my questions, thank you for replying.

Chhanda

5 years ago

I would also like to thank Moneylife for bringing out these cases of fraud / misselling / wrongful charges (whether big or small) by financial institutions consistently. Most of us either have been victims ourselves at some point or know somebody who has been duped out of his/her money. By consistently bringing these incidents into public focus, Moneylife is managing to generate greater financial awareness amongst people. There are many finance-based magazines, but none take up these causes with the focus and single-mindedness of Moneylife team. Kudos to the 'Moneylife' team especially those who work behind the scenes and whose names we do not know.

Although many of us are not proactive enough to bother about making our appreciation known, please do remember that we do appreciate the effort.

P.S. I have known about and read Moneylife articles for almost 2 years and even attended one of their seminars before registering today to write a comment for the first time.

Chhanda

5 years ago

Although this post seems like an old one (going by the comments), I am still glad I read it. Wealth Management has become synonymous with 'Let's fleece the customer'. We would do well to remember that the bank are not really interested in managing OUR wealth. They just want to 'increase their revenues' through commissions on sale of financial products. Would like to narrate a personal anecdote here. I came into some money through sale of a property, and while it is nowhere as large a sum as crores, it is not a small sum in lakhs. Suddenly the relationship managers of the various banks in which i parked the money woke up and started giving me lot of importance and giving all wealth management fundas. They tried very hard to sell some equities and bond products but fortunately since i am familiar with equities and have followed their lack-lustre performance i refused. I also resisted buying any of their Fixed Maturity Plans, and bond based products before i could adequately research their pros and cons. This article serves as a reminder of why it is so important not to get swayed by their 'overly optimistic' projections especially when you have interacted with them in the past and have begun to trust them enough to take their word for it. I thank God and myself for being able to resist their pressure tactics in the past and hopefully in the future.

SocialContributor

5 years ago

All of you please read the book "IF GOD WAS A BANKER"

Dr Vaibhav G Dhoka

5 years ago

Kotak 's group has taken centreage in PERPETRATION of scams.The group headed by Mr Uday Kotak are trained for such frauds and groups head is cool as he has managed all regulators and top Finance ministry honchos.So no action is assured in every SCAM/Fraud. perpetrated by this group.

FIRST CHOICE IPO ANALYSIS

6 years ago

The worst performing BRLM too is Kotak Mahindra Capital Company Limited. They have duped millions of small investors with poor quality IPOs and unrealistic premiums. In the process they have earned hefty fees.

vijay dixit

6 years ago

Similarly there is hugh problem with kotak life smart advantage scheme. it is not transperant. from the first lump sum payment 24% comm is paid to agent and 24% is taken by company. this is done in very arbitary manner. company people misled investor. i do not understand how irda gives permission to this scheme. pl let me know where to complain against irda

regards,

vijay dixit

anshuman rai

6 years ago

It is nice to know that your issue is resolved. I assume that Kotak paid you the money that you lost. That makes you richer by Rs one crore at least!

Did they pay you interest for your 3 year fight?

Also, are you saying that you got this help for just the cost of a Moneylife Subscription? I assume you are a subscriber?


anshuman

REPLY

Rajan Manchanda

In Reply to anshuman rai 6 years ago

It is not a question of being richer. It is a question of what one can salvage ! A bird in hand is worth two in the bush.

Expecting Interest ? I would get an entry in Guinness book of world records. Gentleman we are not living in USA. We are governed by local laws, processes and procedures.

I was " NOT " REPEAT " NOT " a subscriber of Moneylife, although occasionally I did pick up a copy at the book stall. I am today a subscriber. I got this help with just one phone call to Ms.Sucheta Dalal. So getting help at the cost of a Moneylife subscription does not arise.

ONE DOOR CLOSES - GOD OPENS ANOTHER--

Rajan Manchanda

6 years ago

This MESSAGE IS TO THANK Ms.SUCHETA DALAL FOR HER SELFLESS & UNFLINCHING SUPPORT AND FOR THE ARTICLE WHICH HAS RECEIVED WIDE COVERAGE. HER EFFORTS HAVE HELPED IMMENSELY TO RESOLVE THE ISSUE TO QUITE AN EXTENT.

INDEED - MONEY LIFE FOR INVESTOR PROTECTION !!!!!

REPLY

Debashis Basu

In Reply to Rajan Manchanda 6 years ago

We wish, SEBI had decided to play our role, which is also their obligation

Rajan Manchanda

In Reply to Debashis Basu 6 years ago

English Author Edward Bulwer-Lytton -1839 Coined " The Pen Is Mightier Than The Sword "

2011

" The Pen Is Mightier Than The
Regulator "

Deepak R Khemani

In Reply to Rajan Manchanda 6 years ago

Dear Sir,
Please elaborate when you say that the issue has been resolved to quite an extent, have they made good your losses, have you been given any assurances from Kotak or SEBI or any one else? I'm sure that will help others to solve their pending grievances if any

Rajan Manchanda

In Reply to Debashis Basu 6 years ago

Mr.Debashis Basu

I agree 100 % that SEBI should have acted promptly.The complaint was lodged on 1st December 2010.

In a fraud case, where an employee is concerned, SEBI & RBI were very prompt in handling the CITI Bank case. An investors complaint should also receive equal attention specially if the complaint is against a BANK itself.

Today, it is because of an effective MEDIA that people have woken up from slumber. I hope going forward Money Life will play a much bigger role in protecting Investor Interests / taking up the cause of investors.

Mr.C.B.Bhave Chairman SEBI has taken many effective steps for Investor protection and I hope during his tenure WEALTH MANAGEMENT will be properly regulated.

Best Regards

Prakash

In Reply to Rajan Manchanda 6 years ago

Kudos to Debashis, Sucheta and the Moneylife team...

There is someone who stands up and takes up issues fearlessly for investors and gives the right guidance.

Please keep up the good work.

B V KRISHNAN

6 years ago

Thanks for bringing this stunning incident to the notice of other readers. It shows that one has to be very careful while dealing with finance companies - whatever may be their brand image. But it is rather intruiging that Mr.Manchanda who is obviously not new to the world of finance, did not pause to think a bit before writing the cheque to Kotak.

Amit Jindal

6 years ago

I think in this case Mr. Manchanfa should file a FIR with police against the bank and Mr. Kotak like in the Citibank case.

ramkumar barchha

6 years ago

The main problem with such type of incidents is that due to such bad taste people resort to the conventional saving instruments like post,PPF & Bank Fd's.
We than complain that the capital market attracts hardly 2-3% of Indian savings. I strongly believe that if one does not understand a product stay away from trying exotic investment avenues.

NAVIN G BISSA

6 years ago

First of all I do have full sympothy with the client who lost so heavily.But nothing personal I would like to share my general view.In my view these all financial mkts or products never ever creats wealth.But transfer from one pocket to another one.Nobody likes to loose.But this is the market where one wins and other looses.This is a simple rule of this game,which every investor must be aware of .The fact is that whenever one loose money he cries foul in the system.It's very difficult to accept the losses.Then investor blames the system or organisation or the particular person.And just overlooks his fault or mistake while taking decision to invest his hard earned money..So one should be honest enough to judge the facts.If as an investor we should stop cheating ourselves.That's the only solution to avoid such circumstances.

REPLY

TENSING RODRIGUES

In Reply to NAVIN G BISSA 6 years ago

I cannot agree with that. What you have described is gambling, not investment. Gambling is a zero sum game - A loses exactly what B gains. But investment is a win-win game - A and B both gain. One needs to decide whether one is gambling or investing. If one gambles one should expect the results of gambling; if one invests one can expect results of investment.

Wednesday Market Report: Watch 20,200 for support

The domestic market opened soft this morning tracking subdued global cues. The absence of any major triggers and a sell-off by institutional investors resulted in the key indices falling for the second straight day

The market opened lower tracking its weak Asian peers that started in the red on lower commodity stocks. Banking, realty and metal stocks dragged the market lower in early trade. The indices traded in a narrow range till noon when another bout of selling by institutional investors sent the market further down to touch the day’s low in the post-noon session.

However, the key indices pared some of the losses, but ended in the red for the second day in a row.

We expected the Sensex to take support at around 20,400 but the market continued to remain weak. The market closed at 20,301.10, 0.96% down (197.62 points). This is the maximum decline in the Sensex since the rally began on 10 December 2010. The market opened up, with a small gap of 11.23 points, at 20,509.95 today. This was the high for the day. After that, the Sensex continuously fell and reached a new five-day low at 20,243.95.

The market has broken the support of 20,400. The next support lies at around 20,200. Of course, a two-day decline in an ongoing rally is normal. However, if the market remains weak and closes below 20,000 we will have to be prepared for a substantial decline.

The Nifty closed at 6,079.80, down 66.55 points (1.08%). The index touched a high of 6,141.35 and a low of 6,062.35.

The market breadth continued to be negative for the second day. The Sensex had 24 losers against six advancing stocks, while the Nifty closed with 38 losers and 12 gainers. Among the broader markets, the BSE Mid-cap index declined 1.27% and the BSE Small-cap index was down 1.02%.

The top Sensex gainers were Hindustan Unilever (up 1.43%), ITC (up 1.38%), Hindalco Industries (up 1.36%), TCS (up 1.25%) and Tata Power (up 1.17%). The losers list had names like Bajaj Auto (down 3.69%), Hero Honda (down 3.60%), DLF (down 3.28%), ICICI Bank (down 3.08%) and Reliance Communications (down 2.81%).

The sectoral space was dominated by losers. BSE Bankex (down 2.19%), BSE Realty (down 2.03%) and BSE Auto (down 1.95%) were the top losers. BSE Fast Moving Consumer Goods (up 0.72%) and BSE IT (up 0.34%) were the only gainers in the sectoral space.

The Securities and Exchange Board of India (SEBI) today said that merchant bankers cannot refer clients for alternative investments—such as corporate deposits and real estate—beyond the securities market. The regulator announced this while rejecting a plea by Barclays Securities. Merchant bankers act as intermediaries between entities seeking to raise capital through the sale of securities and the purchasers of these securities.

Markets in Asia ended mixed as material stocks edged lower on a fall in prices of gold and crude. On Tuesday, February crude oil futures shed $2.17 to $89.38 per barrel, the lowest settlement since 20th December, while spot gold fell more than $30 to below $1,400 a troy ounce. Profit booking after the recent rally across the region led some of the exchanges lower.

The Hang Seng gained 0.38%, the Jakarta Composite rose 0.63%, the KLSE Composite surged 0.92% and the Straits Times added 0.12%. On the other hand, the Shanghai Composite declined 0.49%, the Nikkei 225 fell 0.17%, the Seoul Composite shed 0.12% and the Taiwan Weighted tanked 1.68%.

Back home, foreign institutional investors were net buyers of stocks worth Rs717.76 crore on Tuesday. Domestic institutional investors were net sellers of equities worth Rs491.57 crore.

Fast moving consumer goods major GlaxoSmithKline Consumer Healthcare (GSKCH) (up 0.98%) has announced its entry into the Indian oral care market through its global toothpaste brand ‘Sensodyne’ with plans to make it a Rs150-crore brand in the next five years. Through Sensodyne, the biggest brand of GSKCH globally worth around $750 million, the company expects to capture up to 5% of the estimated Rs 1,850-crore Indian toothpaste market within the next three to five years.

Pharma company Dr Reddy’s Laboratories (up 0.98%) will contest the patent infringement case filed against it by global pharmaceutical giant Pfizer over its cholesterol lowering drug atorvastatin, said a company spokesperson today.

On 27th December last year, Pfizer had moved to the US District Court for the District of Delaware against Dr Reddy's Laboratories and Dr Reddy's Laboratories Inc for infringement of Pfizer’s crystalline atorvastatin patent.

Jindal Saw (up 7.24%), an OP Jindal group company, has inked a lease pact with Rajasthan government to mine iron ore for 30 years from a deposit containing an estimated 180 million tonnes of resources. The total area covered under the lease is 1556.78 hectares and based on the initial estimates, the mines have about 180 million tonnes of reserves of various categories of iron ore.

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B Rajaram to present paper on Gravity Power Towers at 13th APM-ATS in Paris

Our babus continue to ignore his inventions, while the world honours the technology man who patented an anti-collision device, made the Skybus and more recently the Gravity Power Towers

Rajaram Bojji, former managing director of Konkan Railway, never got a chance to implement his revolutionary Skybus project which would have provided inexpensive, air-conditioned mass transport without land acquisition! The idea, backed by 17 patents, was abandoned by Indian authorities despite a successful demonstration in Goa. But Mr Bojji, who is better known as B Rajaram, moved on to new research and has kicked off the new year with a bang.

Automated People Movers and Transit Systems (APM-ATS) has accepted Mr Bojji's work on Gravity Power Towers (GPT) as a peer-reviewed paper to be presented at its 13th International Conference on 24 May 2011. The biannual international meeting is being held in Paris for all those involved in the development of fully-automated people movers and urban transit systems around the world.

This is an honour for the man who invented the anti-collision device (ACD) for the Indian Railways and has already got 17 patents for his inventions. He has assigned the intellectual property (IP) rights of this technology to the president of India, which has the potential to generate additional revenues of between Rs300 crore and Rs400 crore per annum for the Konkan Railway.

In a message to Moneylife, Mr Bojji said, "With the GPT, the world will be benefited by a more economical and nature-friendly transportation system that runs substantially on eternal gravity. With GPT, the carbon emissions can be substantially reduced in the future. This totally automated system neither uses electrical traction motors on the rolling stock nor fixed signal train control systems. All it uses is automated energy control systems from gravity power towers, which can redefine our safety standards and lifestyle as well. It can be even adopted by the existing legacy systems. A dream of mine has taken the first step. Hope humanity benefits."

While, the Indian Railways is still 'thinking' about implementing indigenous technology, one of its technology drivers has moved on to bigger and better things.

Mr Bojji's GPT principle re-directs vertical-acting gravity force in a horizontal direction to create a tractive force on a mass on wheels-either rail or road-to accelerate, then sustain speed, and when decelerating to recover kinetic energy. It is almost like the action of a pendulum.

The recovery on the GPT system can vary from 95% to 70%, depending on the distance of uniform speed-the longer the distance, the lesser the recovery. Hysteresis losses owing to friction cause increased irrecoverable energy loss. GPT has been granted a patent in the US.

Mr Bojji has also presented the outline for a $450 billion scheme to create a cargo transportation network of about 100,000 km to be fully powered by the GPT in the US. The network, fully powered by gravitational force, would save around 97% of energy being utilised currently, and generate 30% surplus after meeting all expenses, while generating a million blog GPT.
It is estimated that gravity power systems could contribute 30-40% of the Earth's total energy needs, taking care of transportation of people and cargo, while attaining speeds of 360 kmph on rail-based systems.

Unfortunately, as the world rewards and awards the Indian innovator, the Indian government has shunned his solutions. The best example is the anti-collision device that he devised and which was given a patent, but the Railways have chosen to ignore it while trying to adopt the European Train Protection Warning System (TPWS) on busy rail routes. (Read, 'Is the anti-collision device system being derailed?' ; 'Why we are denying Raksha Kavach to rail commuters?' )

Mr Bojji's other creation, the 'Skybus', was also left by the wayside by Indian authorities planning mass transit systems. Further, while the anti-collision device was singled out by the World Intellectual Property Office for special coverage, the Skybus Metro Rail System was described in special programmes on National Geographic and Discovery channels.

Mr Bojji was involved with the Konkan Railway project as chief engineer from the beginning of its construction in 1990, then as director for projects and finally as managing director between 1998 and 2005. He was instrumental in delivering more than 100 tunnels (including the Mumbai-Pune Expressway tunnels), about 2,000 bridges and 750 km of live running track through treacherous terrain in Maharashtra's Konkan region.

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COMMENTS

Java

6 years ago

The reason Mr Rajaram's inventions are not used in India is because there's no money to be made by the politicians and bureaucrats. Similar, but far more expensive technology from abroad will be readily ordered, because of the benefits - to the babus and netas.

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