Sucheta Dalal :Osian Art Fund: Dirty canvass
Sucheta Dalal

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Osian Art Fund: Dirty canvass  

May 26, 2011

Investors in Neville Tuli’s art fund have been taken for a royal ride. Despite constant pressure from Moneylife and collective action from investors, the saga has been one of broken promises

Sucheta Dalal

The Osian Art Fund of Neville Tuli was a creation of the unprecedented four-year bull run in stocks, commodities, real estate—and art—between 2003-07. With rising corporate paycheques and wealth from all asset classes touching stratospheric highs, there was a whole new population of high net-worth individuals (HNIs) seeking what seemed to be a more cultured and sophisticated investment option. Works of good artists, especially those like MF Husain, Bikash Bhattacharjee, VS Gaitonde, Akbar Padamsee, Jogen Chowdhury, Somnath Hore and Tyeb Mehta were rising sharply; so the timing was perfect for an ‘Art Fund’. Unfortunately, what should have been the next big investment opportunity is looking like a sham. Did Mr Tuli’s dream hit the hard rocks in the upheaval caused by the global financial crisis or was it a case of reckless diversification, mismanagement and a poor understanding of the mechanics of investing? Whatever the real reason, investors in Mr Tuli’s art fund have earned no returns. Worse, although the Fund was wound up in 2009, many are fighting to get back anything between 60% and 100% of the principal invested.

A couple of years ago, Mr Tuli used to unfailingly promise to return the money—just a few months down the line. He is doing it again. This time, however, he is resorting to not-so-subtle threats and says nothing about when he will return it. After a flurry of emails, and when investors began to gang up to initiate collective action, Mr Tuli finally wrote to say that ‘a statement’ would go out to investors and there was “no question of not paying the Unit holders.” But let’s first look at what Mr Tuli promised.

In June 2006, the Osian Art Fund artfully side-stepped regulatory clearances and raised a neat Rs102.40 crore from 656 unit-holders spread across 39 cities. Banks such as Royal Bank of Scotland (RBS, then ABN AMRO) and BNP Paribas earned fat commissions marketing it to HNIs. The scheme was locked in for three years, but used to declare high net asset values (NAVs) that suggested a 30% return for at least a year after it was launched. However, several things happened as the redemption day approached. The Securities and Exchange Board of India (SEBI) issued it a show-cause notice in November 2007 asking why it should not be regulated as a collective investment scheme. Osian appeared for a hearing before SEBI in 2008. Even before that, in February 2008, SEBI issued an official advisory that art funds were collective investment schemes and would have to be registered with it or be liable to civil and criminal action.

However, there was no follow-up action by SEBI, since Osian was wound up on 10 July 2009. Neville Tuli wrote a personal letter to investors in July 2009 assuring them of decent returns, despite ‘tough’ times, and telling them that they would be paid as per the ‘redemption guidelines’. Essentially, he gave himself 120 days to make the payment.

By October 2009, there was no sign of payments being made which is when Moneylife first wrote about it. After constant pressure from Moneylife, Osian paid many of the investors who had written to us. Some received 85% of their investment; others 90% and some got their principal back. We now discover that these were either investors who had approached the media or were influential in the financial world—like the head of a brokerage firm and of a mutual fund. Many investors were not as lucky, especially those who came through RBS. For two years, they have been fobbed off with promises. They have now turned restive.

On 25 April 2011, Mr Badri, a unit-holder of Osian, managed to get hold of over 50 investors’ email IDs and wrote to them seeking to initiate collective action against Osian. Dozens of them responded (we have access to all these emails) and agreed to join in. Immediately thereafter, on 26th April, Osian’s president, ‘Ambassador (retd) Niranjan Desai’ offered Mr Badri an option to ‘buy art against amount owed’. When he refused to accept it, Mr Desai said, Osian was ‘fully committed’ to the redemption of investment in the art fund, but was “unable to give an exact timeframe when this would happen.”

Meanwhile, another investor, Pankaj Butalia, recovered his full investment (at an NAV decided by the Fund) in instalments that ended in January 2010 after threatening to file a police complaint and go to the press. Mr Butalia even started a blog—

Interestingly, the cheques were issued from Neville Tuli’s personal account. Mr Butalia claims that he was told not to disclose that he had received full payment and was to swap it for money from Osian when that payment was made.

Moneylife reader Bosco Menezes received 85% of his investment a couple of years ago and is waiting for the rest. Pankaj Prakash, who invested Rs10 lakh, has got nothing and is planning to file a police complaint. There are many others in the same boat who want to join the collective action. Murthy Rojukhirdu is another in a similar plight. Each investor has his own story of fruitless follow-up and empty promises. For instance, on 15 June 2010, Mr Badri was told by Shubhendu Chakravorty of Osian that an auction of its artworks was to be held in Mumbai on 23 June 2010 to mobilise funds and hoped that redemptions would start by July 2010. Nothing happened.

Vinit Chordia, another RBS customer, claims he was ‘forced’ to accept art work at ‘exorbitant valuation’ on which he also ended up paying sales tax. He says, the Bank told him that the fate of his money was uncertain if he did not take this option. Interestingly, he was promised a buyback if the artwork was held for 12 months. Another HNI customer of RBS, Rai Ajai Kumar, a former Air Force pilot, writes that the Bank aggressively marketed Osian to its customers.

Mr Kumar is angry that he hasn’t received a single penny back, nor has he got answers about the method of NAV calculation.

Mr Tuli has always claimed that Osian still holds valuable art works. Since the price of good art has not declined, he needs to come clean and explain why he is unable to liquidate the collection and raise funds for more than two years. He must also explain how much of the money went into his collection of Hindi film memorabilia or other film-related acquisitions that had nothing to do with art and probably had suffered value erosion. Instead of explaining the situation, Mr Tuli resorted to copying his lawyer Nishit Desai on emails to Moneylife and accused us of publishing distorted information. At the same time, he was calling investors asking them to hold off action. Late evening, on 27th April, Mr Tuli wrote to say that unit-holders waiting for their first payment would be paid between 17th and 29th May. It remains to be seen if that happens.

In one of his emails, Mr Tuli even made the preposterous claim 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.”

This, when SEBI had issued an advisory in February 2008, threatening civil and criminal action against art funds that fail to register with the regulator! Mr Tuli’s assertions only underline the need for more proactive action from SEBI. Since the regulator is silent, investors continue to suffer.

Sucheta Dalal is the managing editor of Moneylife. Subscribers get free help in resolving their problems with select providers of financial services. She can be reached at

(This article was first published in the Moneylife magazine edition dated 19 May 2011 that was available on the stands from 5 May 2011.


-- Sucheta Dalal