Three Ways Scam-hit Investors Can Help Themselves
One of the chilling side effects of the COVID pandemic, especially its second wave, is that it has given a free pass to the government and its regulators on redress for victims of financial fraud. 
People with ‘safe’ investments in bonds and non-convertible debentures (NCDs) watched their hard-earned nest-egg evaporate overnight. The trauma is especially acute for senior citizens and private individuals outside the luxury of a taxpayer-funded, inflation-adjusted pension that increases with every Pay Commission. All investigations are proceeding at a glacial pace or have simply stopped. Investors affected include those who had put money in IL&FS, DHFL, Yes Bank, Lakshmi Vilas Bank and PMC Bank, among others.
Although statutorily mandated to protect investors, financial regulators do not care about retail investors, since the finance ministry does not demand accountability and our members of parliament (MPs) have no interest in issues that do not affect their vote bank. Consequently, statutory regulators do not even respond to, or acknowledge, a formal memorandum/representation from investors, even when it comes from a registered not-for-profit organisation. Applications under the Right to Information (RTI) Act to seek information are also treated with disdain. This was Moneylife Foundation’s experience when we wrote to the Securities and Exchange Board of India (SEBI) chairman in December 2020. An RTI application to find out what happened to the memorandum was deliberately misinterpreted to tell us that the issue was under the registrar of cooperatives and the ministry of agriculture. 
If this happens to NGOs with a 10-year track record, can individuals expect any empathy? SEBI has been sitting on Rs15,448.67 crore collected from the Sahara group for nearly seven years and is in no hurry to return the funds, claiming that it cannot find the investors. It flatly refuses to engage with us or think out-of-the box or listen to logical pleas for a refund which can be ratified by the Supreme Court (SC). 
The biggest irony is that those mandated by the SC to oversee the collection and return of funds are handsomely compensated (under a Court mandate), while desperate investors hold protests all over India in small groups and one has even committed suicide!
What are the options for victims of financial fraud? Clearly, silence is one of them. Unfortunately, many victims believe that someone else will fight their battles or that media reports will lead to action. Some believe that social media posts get instant results. This may work for consumer issues when corporate reputations are at stake but not for financial fraud which requires government regulators or investigation agencies to act. 
Victims of financial fraud will have to find ways to disrupt the present status quo to force the government to wake up to their losses. They need to push for standard processes to protect their interests. For instance, if the public uproar over the Punjab & Maharashtra Cooperative Bank (PMC Bank) collapse led to increase bank deposit insurance from Rs1 lakh to Rs5 lakh, why don't we have similar minimum protection for retail investors in NCDs, bonds and pension accounts of companies under bankruptcy resolution processes? Several court judgements support such action; but these investors have been ignored. Here are three things that could work, if investors work collectively and make their voices heard. 
1. Petition Elected Representatives: India is a democracy. A basic feature of democracy is public participation. Elected ‘representatives’, as the word signifies, are supposed to ‘represent’ our interests. However, it never strikes us that the first thing we should do is to petition our elected representatives to resolve our issues. And, yet, when it comes to voting, we line up like sheep to vote. Fortunately, most politicians across parties are on social media today and a well-organised campaign, with appropriate hash-tags, can make a difference if people come together to fight. It is time we start demanding that our MPs pay attention to our issues, especially since the regulatory system is so anti-investor.  
2.Push for Class Action: Soon after the Satyam scam, when Indian shareholders were left high and dry (while US investors were compensated), the Companies Act, 2013 introduced class action in India under Section 245 (oppression of minority shareholders). But this is just a pointless clause, since many of the provisions are vague and ambiguous. It allows only investors and depositors to file class action that too before a tribunal and not civil courts. It also excludes other stakeholders. Worse, the Act makes no mention of funding of litigation. 
In the US, class action is funded on the contingency model, where lawyers do not charge fees upfront but can retain a portion of the settlement amount. This ensures that lawyers are also interested in a fast outcome and many issues are settled out of court. 
In our work at Moneylife Foundation, we have noticed that high legal fee of competent lawyers is the biggest stumbling block to collective action. Investors with smaller amounts at stake are unable, and unwilling, to join groups because litigation drags on for decades making it unviable. Worse, regulators are invariably parties to the suit and work against investor interest by using public funds to hire the best legal brains. This travesty has never been adequately discussed, nor have regulators been forced to explain why their oversight and supervision failed so badly. In the US, class action supplements regulatory oversight. In India, we have a fight on our hands to make class action work.
3. Form Specific Pressure Groups:  Social media enables victims to form groups quickly to fight single-mindedly for a specific cause. This helps pool knowledge, dig up information, save litigation costs and afford high-quality legal representation. Since the sole objective of such groups is to recover their investment, they need to find their own leadership to take the fight forward. Here are a few examples of collective action groups.
Yes Bank AT-1 Bond Holders’ Association: Those who want to join have to share proof of their investment and contribute Rs5,000 per bond holding to be admitted to a Telegram group which is working in an organised manner and has already filed litigation. (Investors can email:[email protected] or call 8558996997).
ITNL Retail Public NCD Holders’ Association: These investors hold NCDs of IL&FS Transport Networks Ltd. The Association is registered at: B-557, Vasant Kunj Enclave, New Delhi-110070; Email: [email protected] Phone: 9990300772. ITNL is a listed entity and one of the largest step-down holding companies of the beleaguered 347 company IL&FS group whose board of directors was sacked in October 2018. 
While a new board comprising retired bureaucrats, and headed by banker Uday Kotak, has been formed to resolve the issues of this group, retail investors are yet to hear from the trustees. They are fighting to demand 100% protection of their principal. Like with Sahara, IL&FS has a whole team of bureaucrats supported by a team of very expensive lawyers, consultants, auditors and a retired judge in charge of oversight. 
The board expects to recover over Rs63,000 crore of IL&FS’s total debt estimated at nearly Rs1 lakh crore. But nearly three years have elapsed and these claims are cold comfort to investors who see no sign of a single rupee being paid out to them. Unless there is more pressure, things are unlikely to change. The irony is that the government continues to pay IL&FS’s debts to large multilateral institutions like Asian Development Bank and Kreditanstalt für Wiederaufbau (KfW) of Germany to honour a strange sovereign guarantee wangled by this private group. But nobody cares to pay even a part of the money recovered to retail investors. 
Dewan Housing Finance Ltd (DHFL): The company is making news for the strange offer from Kapil Wadhawan from jail, to pay almost twice what the Piramal group has offered to retain control. Mr Wadhawan has offered only Rs9,000 crore upfront (nobody is clear where that is stashed) and the rest over an extended period. Given the fraud at DHFL and another branch of the family that had destroyed PMC Bank and HDIL (Housing Development and Infrastructure Ltd), this offer is laughable; but desperate retail investors who will stand to lose badly are keen that it is considered. 
DHFL investors have no clear group, although some litigation has been filed individually. A lone investor, Bipin Kochar, has been doggedly following up with the debenture trustees to push for distribution of the debenture redemption reserve (DRR) of Rs1,170 crore (according to the 2019-20 balance sheet), which he claims is being expropriated by the administrator by misusing the provisions of the bankruptcy law. He is pushing DHFL trustees to make a proper representation before the Supreme Court. But unless more investors join his effort, it is a futile and lonely battle. 
Mr Kochar correctly says, if DHFL’s trustees fail to act, they will create a template for other corporates before the bankruptcy court to ‘similarly expropriate’ the DRR that has been created, impacting many senior citizens living on interest income. Mr Kochar’s emails show that he is a very knowledgeable and DHFL investors would do well to rally behind him and force the debenture trustees to push their cause. 
Writing for Moneylife, V Ranganathan, who headed Ernst & Young’s tax and regulatory advice, has called the Piramal offer a ‘shocker’ since it is “at a huge discount to the even written down value of the assets held by the company.”
There are rumours about pressure on banks to accept the Piramal offer. If retail investors were a more cohesive force, they would probably have forced banks to cap the upside for Piramal, as suggested by Mr Ranganathan, and leave something on the table for retail investors.
Moneylife Foundation has been working for over a decade to raise awareness among people and make them understand that they need to get together to fight for their rights. It is a long war and we have won only a few small battles. Unless people realise the need for collective action, using one of these three—or other methods—things won’t change. 

1 year ago
can you connect me to Mr. Bipin Kochar, who has been pursuing DHFL case or pressure group formed for the purpose of retrieving the hard earned retirement money in DHFL NCD.
1 year ago
Court doesn't seem to have consideration of the Small holders and Secured NCD holders, according to the latest proposals looks like even the small holders hard earned money will get only 40% of what they are owed, meanwhile the IRP professionals and the Catalyst and other Trustees have been raking in 100 crores in fees etc.. NCLT have to fix standard fees for these, NCLT process has become a big money making machine for these Big firms like E&Y and big Law firms.
It used to be that when it as handled thru Liquidator of companies, none of big time firms would even apply for providing services, as it was a meagre amounts
1 year ago
Commendable effort.I own ncd of dhfl..even during the times news broke n they were available at 30% yld.part of reason to observe fate of such secured ncds in indian act if possible in any small way so they get their share of money against security..though not possible to file petition.can complaining to as dhfl is listed and sebi should entertain and act on holders respind
1 year ago
what is the process /procedure that I/WE can follow to retrieve my funds and securities balance fraudulently misused by Arcadia Share and Stockbrokers CEO/Management
1 year ago
Pls help me to guide into the right group where i can fight for my money in lakshmi vilas bank as i hold nearly 8000 shares hard earned money gone
1 year ago
It is very helpful artical,as well as makes us aware of small investors as well. We had invested in Secure NCD of DHFL,so that we will continue to get more interest from bank,and it will help in our expenditure in old age.
Secure NCD,AAA+ Rating makes no sense. Here is mentioned so many scam, we were not even aware of it. What then do govt. Or controlling agencies do.
1 year ago
Unity is power .... We have to show it... We want all money back...


Digital postcard campaign
1 year ago
Very well written. Please connect me to groups or people fighting for DHFL Retail NCD holders. Thanks
1 year ago
It is mockery of rules and regulations and regulators failure has increased fly by night operators.It is true individual investors are scattered throughout India and therefore are unable to come together.They go by condition in prospectus which are only to get nod from regulators as our regulators are involved in scam due to failure to take action due to which there is no fear of law and punitive action .Our courts and regulators are shamed us.
1 year ago
Is there any specific reason why Karvy scam is not mentioned in this article, there are many forums and associations have been formed by the retail investors, who were duped by Karvy. The IBC Laws do not help the retail investors, whose hard earned savings have been taken away through multiple fraudulent schemes designed by Karvy.
Replied to arinds comment 1 year ago
If you read Moneylife regularly, you would know the work we have done on Karvy. If. you don't I would suggest you google this website. We formed the first telegram group for Karvy... after I had personally helped nearly 100 people get back at least 20,000 each or their shares. The Telegram group was disbanded because of relentless spamming by a small sub group and the fact that nearly 1000 odd members did not seem to realise that litigation was their only option and less than 20 agree to write a representation to the SEBI chairman that had been drafted by a well known securities lawyer, at our request, that too free of cost. So no , it was not mentioned since there is no group that we know anymore
Replied to sucheta comment 1 year ago
Sure Ma'am, I will connect you with the groups, who are fighting to recover their hard earned savings. I am part of two groups, since I had invested in two schemes only. However, I hear from the fellow group members that there are at least 25 such groups. It would be great help to these estranged investors, who are mostly senior citizens running pillar to posts to understand the recovery process.
1 year ago
Can you share mr Bipin Kochar details for dhfl NCD matter?
1 year ago
Mam, could you please put up the list of NCD along with the amount due so that all investors are aware of the scam done by companies in collaborating with SEBI, because SEBI gives the permission for raising funds thru NCD and after the same is raised companies default, what role does SEBI had after defaults., What about MCA...just keep mum no action taken let the investors suffer.. for years. what is your opinion on the same awaiting your response.
1 year ago
Excellent article.! Making representation to the elected representative is a good suggestion and likely to work. There also cases of vanishing companies after collecting fund through approved IPO. I would ike to know to whom we should go to for such vanished companies! One is even involving SBI !!
1 year ago
Very good article. I pray DHFL investors get relief soon...
We need to file petitions and then get thr justice.
1 year ago
Please draw attention on Secured NCDs issued by RHFL and SREI Infrastructure. Both of them have defaulted and are not ready to pay SECURED NCD's amount. How can someone raise thousands of crores as secured NCD from common people and then declare themselves as Bankrupt. Why is RBI/SEBI letting such thieves to plan a daylight loot?
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