The conclusion of SEBI’s recent actions brings a glimmer of year-end optimism for numerous investors, as the regulatory body imposes a noteworthy penalty of Rs 1 crore on Unitech Advisors (India) Pvt Ltd and its directors, Ajay and Sanjay Chandra. This resolute move comes in response to the failure of Unitech Advisors, now rebranded as Auram Asset Management Ltd, to promptly wind up three real estate funds within the stipulated timeframe, despite being granted multiple extensions. The comprehensive investigation conducted by SEBI has brought to light various infractions committed by the fund house, including imprudent investments in group entities, flawed investment decisions, and the protracted withholding of funds from a significant majority of investors.
SEBI’s stringent actions extend further with a joint penalty of Rs 10 lakh imposed on Sanjay Chandra, Hitendra Malhotra, and Deepak Bajaj — directors associated with Unitech Advisors. This financial repercussion stems from their collective failure to furnish essential information and returns. Additionally, another penalty of Rs 10 lakh each has been levied on Hitendra Malhotra and Deepak Bajaj for their dereliction in promptly addressing investors’ grievances. The gravity of the situation deepens as SEBI applies a Rs 10 lakh penalty individually to each of the three trustees of the fund house — Vijay Tulshyan, Mahesh Kumar Sharma, and Rakesh Dhingra.
In a move that underscores regulatory determination, SEBI instructs Unitech Advisors to conclude the winding-up process of the three realty funds within a span of six months. Notably, this directive comes with a mandate for transparent valuation of the underlying assets to ascertain the net asset value (NAV). Subsequently, investors will be accorded the choice to exit through either the in-specie distribution method or at the prevailing NAV.
The investigative findings underscore that Unitech and its fund managers transgressed regulations by illicitly extending the schemes’ tenures beyond the specified parameters in their offer documents. Launched around 2006-07, the three schemes — CIG Realty funds I, II, and IV — were conceived as high-risk, high-return, close-ended financial instruments. However, the complex landscape of real estate, marked by project delays across the nation, led to the predicament faced by many such funds.
This saga of financial entanglement first gained attention in October 2019 when Moneycontrol’s extensive investigation shed light on the challenges faced by investors in various real estate funds, including CIG Realty funds. Notably, the fund’s opaqueness and the dearth of publicly available information added to the complexity. The recent SEBI order provides a significant update on the whereabouts of Unitech’s directors, with Ajay Chandra currently in Taloja Central Jail near Mumbai, and Sanjay Chandra’s location remaining elusive.
SEBI’s order further underscores Unitech Advisors’ misrepresentation of the approval secured from unitholders to extend the schemes’ tenures. The regulator reiterates that, as per erstwhile Venture Capital Fund guidelines, approval for tenure extension necessitates the support of investors representing 75 percent of the capital contribution, in addition to the written consent of the trustees.
Despite claims by trustees regarding resolutions for investor payouts and scheme wind-up, SEBI found a conspicuous absence of evidence substantiating the sale of investee properties to generate requisite funds. The non-responsive stance of fund officials to SEBI’s notices precipitated the imposition of monetary penalties, coupled with a stringent two-year ban from participation in the capital markets. Trustees face additional sanctions, including a ban on assuming new trusteeship positions at any alternative investment fund (AIF) for a year, coupled with a mandatory dissociation from any mutual fund or other SEBI-registered entity for the same duration.