Neville Tuli's latest promise to pay back money raised for Osian's Art Fund comes after the threat of collective action by some aggrieved investors
The threat of investor action has forced Neville Tuli, Chief Advisor, Osian Art Fund, to issue yet another promise to pay back those who invested in the controversial but high-profile art fund in 2006. This time, Mr Tuli says, those investors who haven't got any of their money back will be paid between 17th May to 29th May. Mr Tuli, who was apparently refusing to respond to investor queries, turned proactive after Moneylife took up the story of dozens of investors threatening to get together to file police complaints and lawsuits.
To recap, Osian Art Fund is a three-year close-ended fund launched in June 2006. It raised Rs102.40 crore from 656 unit-holders across 39 cities, most of them high net-worth individuals (HNIs). The scheme used to declare Net Asset Values (NAVs) showing 30% returns, but when it was time for redemption, the money wasn't forthcoming. The Securities & Exchange Board of India (SEBI) had also issued it a show-cause notice in November 2007 asking why it should not be regulated as a collective investment scheme; it also issued an advisory that civil and criminal proceedings can be started against art funds that were not registered with SEBI. The scheme was wound up on 10 July 2009, at which time Mr Tuli wrote to investors that redemptions would be made over the next 120 days as per the terms of the redemption guidelines. But by October, when the money wasn't forthcoming, Moneylife was the first to report on Osian's problems (Read Osian Art Fund delays payout).
Following our reports, many investors were paid anywhere between 40% to 100% of their principal but earned no returns at all. The rest have been kept hanging for two years with promises of payment. At one stage, investors were told that they would receive their money after an art auction in June 2010 to raise cash; again, no payments were made.
Finally, on 25th April, some angry investor got hold of a long list of aggrieved unit holders to get support for joint action. Immediately, some were offered artwork instead of cash. Some investors claimed that they had been 'forced' to accept artworks at extremely high valuations in lieu of their payment.
When Moneylife emailed Mr Tuli for this reaction, he reacted with anger and accused us of publishing distorted emails. In a subtle threat, he even began marking his legal firm Nishit Desai & Associates on his flurry of emails to us. At one stage, despite a clear SEBI advisory in February 2008, Mr Tuli even claimed that art funds are not declared as collective investment schemes by SEBI, they merely suggested that the collective investment scheme could be a possible option and/or a base to study a regulatory framework for art funds in the future. Our question in all the emails was simple. Was Mr Tuli planning to pay back investors who have not received any returns and anywhere between 60% to 100% of their principal, even two years after the Osian fund was wound up?
By the evening of 27th April, Mr Tuli told us that a statement would go out to all unit-holders about repayments. He even called some investors requesting them to hold off action. Finally, late in the evening, Mr Tuli wrote the following letter to unit-holders:
Dear Unit Holder,
The recent wave of emails by a few of you is understandable given the delays in the art fund's redemption. However, as always stated the Fund is totally committed to paying all our Unit Holders in full, and it continues to do so despite immense liquidity problems.
The instalment for those still awaiting their first payment will begin by Thursday, 17 May 2011 and will be completed by 29 May 2011 as mentioned earlier to the bankers. The offer for those who have chosen to take art in lieu of their redemption will be closed by Monday 7 May 2011 but can be renewed at any time for any individual Unit Holder who wishes to avail of such an offer.
I know at times our communication process has been slow, but please recognize that the bankers were initially dealing with all the Unit Holders, and now that this responsibility is mostly upon us, naturally it takes time given the small team available to the Osian's Art Fund. This is no excuse but coordinating on individual matters and mails with 656 investors has been very difficult. Maybe this coming together of a few investors will improve the communication.
Further, please desist from rash, defamatory and baseless allegations, without verifying the facts. I am always available to answer your queries and difficulties via email or SMS or direct lines. I am not going anywhere despite the wonderful suggestions by a few unit holders.
Once and for all, every thing in our power is being done so as to complete the redemption process, and I am sure despite the past delays, irrespective of the problems we are facing the full redemption process will be completed by the end of June 2011. You all have been very patient and graceful, and I am grateful for this courtesy, and do regret disappointing your expectations, but the key is that we do not give up on honouring our commitments whatever the personal cost and effort.
With Warm Regards
Chief Advisor Osian's Art Fund
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