X : : : : : : : : : : : : : : X NATURE OF THE ACTION. public offering (the "IPO" or "Offering") of Rediff.com India Ltd. ("Rediff" or the "Company")

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1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK THOMAS KARAKUNNEL and ROGER STEWARD, on behalf of themselves and all others similarly situated, vs. Plaintiffs, REDIFF.COM INDIA LTD, AJIT BALAKRISHNAN, NITIN GUPTA, RAJIV WARRIER, RICHARD LI, GOLDMAN SACHS & Co., CREDIT SUISSE FIRST BOSTON CORP., and ROBERT FLEMING INC., Defendants. X X Case No. CLASS ACTION COMPLAINT JURY TRIAL DEMANDED NATURE OF THE ACTION This is a federal securities class action arising out of the June 14, 2000 initial public offering (the "IPO" or "Offering") of Rediff.com India Ltd. ("Rediff" or the "Company") of 4.6 million shares of Rediff American Depository Shares ("ADS"). This action is brought on behalf of all persons who purchased Rediff ADSs pursuant or traceable to the IPO and through March 20, 2001, inclusive. JURISDICTION AND VENUE 1. The claims asserted herein arise under and pursuant to Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended (the "Securities Act") [15 U.S.C. 77k, 77l(2) and 77o]. 2. This Court has jurisdiction of this action pursuant to Section 22 of the Securities Act [15 U.S.C. 77v] and 28 U.S.C and 1337.

2 3. Venue is properly laid in this District pursuant to Section 22 of the Securities Act and 28 U.S.C. 1391(b) and (c). The acts and conduct complained of herein, including the preparation, issuance and dissemination of materially false and misleading information to the investing public, occurred in substantial part in this District. 4. In connection with the acts alleged in this Complaint, defendants, directly or indirectly, used the mails and the means and instrumentalities of interstate commerce, including telephonic communications. PARTIES 5. Plaintiffs Thomas Karakunnel and Roger Steward purchased Rediff ADSs, as set forth in the certifications attached hereto and incorporated by reference herein, traceable to the Company s initial public offering, and were damaged thereby. 6. Defendant Rediff is incorporated under the laws of India and maintains its executive offices at Mahalaxmi Engineering Estate, L.J. First Cross Road, Mumbai India Each of the individual defendants (the ''Rediff Defendants") served, at times relevant to the claims set forth herein, as a director and/or as a senior executive officer of Rediff as set forth below Name Ajit Balakrishnan Richard Li Nitin Gupta Rajiv Warrier Position Chairman of the Board of Directors and Managing Director, signed the Registration Statement Director President and Chief Operating Officer Chief Financial Officer - 2 -

3 8. Defendants Goldman Sachs & Co., Credit Suisse First Boston Corporation, and Robert Fleming Inc., (collectively, the Underwriter Defendants ) substantially participated in the commission of the wrongs alleged herein through their involvement in the Offering of Rediff shares. The Underwriter Defendants were at all times entities engaged in the business of investment banking, underwriting and selling securities to the public. The Underwriter Defendants were co-lead underwriters of the Offering, for which they received substantial fees. Prior to the Offering, the Underwriter Defendants were under an obligation to conduct a thorough investigation into the business, operations, prospects, financial condition and management of Rediff, known as a due diligence investigation. In the course of such investigation, the Underwriter Defendants could have obtained knowledge of the facts alleged herein if they had acted with reasonable care. SUBSTANTIVE ALLEGATIONS Background Facts 9. Rediff describes itself as the leading Internet portal focusing on India and the global Indian community. Rediff's website consists of interest specific channels, extensive community features, local language editions, sophisticated search capabilities, and online shopping. Rediff also provides , chat rooms, instant messaging and personal homepages. The company has a U.S. edition of its site, with content geared to the Indian community in the United States. Rediff's Internet content is controlled in part at a facility in California. 10. Rediff earns revenue from two primary sources (1) advertising and services, consisting of fees from clients advertising on Rediff's website, including fees for - 3 -

4 designing an Internet strategy for clients and implementing it through website design; and (2) e- commerce, for which Rediff recognizes revenues from the sale of products. Both of these revenue streams depend on Rediff's ability to attract viewers to its website, and many of Rediff's advertising contracts contain pay scales based on the number of "hits" that a particular banner advertisement on Rediff's website attracts. Advertising and services comprised the bulk of Rediff's revenue at the time of the IPO, with $785,000 in advertising and services revenues recognized in the year ended March 31, 1999 compared to $69,000 earned from e-commerce. 11. On or about June 14, 2000, Rediff filed with the SEC a final Form F-1/A Registration Statement (the "Registration Statement"), which incorporated a prospectus (the "Prospectus") for the Offering. The Prospectus became effective on June 14, 2000, and Rediff sold, through the underwriters, 4,600,000 shares at $12 per share, netting proceeds of $50.3 million after commissions and underwriter discounts. 12. This action alleges that defendants failed to disclose numerous facts about Rediff's business prospects and especially about the nature of its advertising customer base, the qualifications of its management and directors, and significant software problems which hindered its ability to attract viewers and the advertising customers on which Rediff depended for revenue

5 The Prospectus Issued In Connection With The Offering Was Materially False And Misleading 13. Because Rediff's business depends on the number of viewers its website attracts, the Prospectus described, in very positive terms, the Company's ability to target the Indian community, stating that We serve the online needs of the global Indian community, and have developed our offerings based on the demands and the requirements of our user base. We have been in business since 1996, and hence have a large archive of content focused on India and the global Indian community. The Prospectus then listed the various content and services that Rediff employed to attract viewers, including channels that are relevant to Indian interests, including cricket, finance, Indian music, astrology, weather, airline and train schedules, , e-cards and contests. 14. The statement in 13, above, was materially false and misleading because, beginning in March 2000, Rediff began experiencing serious problems with its system, which negatively impacted its ability to attract and retain users and which compromised its attractiveness to current and potential advertising clients. The problem involved Rediff's software and required substantial outlays of capital to address, and was not fixed until after the IPO. 15. The Prospectus described Rediff's advertising revenues, on which the Company depended, as follows Advertising on our site currently consists of banner-style advertisements, buttons and sponsorships. Currently, most of our advertisers enter into agreements pursuant to which they pay a fixed fee for a fixed time period. These agreements range from - 5 -

6 three months to one year...we had 44 advertisers on our site as of March 31, 2000 and a total of 165 advertisers on our site during the fiscal year ended March 31, The Prospectus also highlighted several internationally recognized and well-heeled companies, or subsidiaries of such companies, as advertising clients that supposedly were representative of the Company's advertising clients in general The following is a selected list of our current advertising customers, which are representative of our advertiser base -Hewlett Packard India Pvt. Ltd. -ABN Amro Bank N.V. -Discovery Communications, Inc. -ICICI Limited -Oracle Software India Ltd. -The Gillette Company -Proctor & Gamble India -Longines Watch Co. -L.G. Electronics India Pvt. Ltd. [Emphasis added] 16. The statements referenced above in 15 were materially false and misleading as they misrepresented and/or omitted the following adverse facts which then existed, the disclosure of which was necessary to make the statements made not false and misleading, including that a. the impressive list of well-capitalized corporate giants, such as the Gillette Company and Proctor & Gamble India, were not representative of Rediff's advertising clients -- the majority of which consisted of nascent startup companies; and b. a significant percentage of advertising and sponsorship contracts were scheduled to expire during December The Prospectus contained descriptive paragraphs of Rediff's executive officers and directors, which recounted their relevant experience, qualifications, and academic - 6 -

7 accomplishments, and which gave the impression that Rediff had selected an outstanding management team. The Prospectus described Richard T.K. Li as a being a graduate of Stanford University who had earned a Bachelor of Science degree in computer engineering -- a particularly fitting qualification given the Company's business T.K. Li has been a director of Rediff.com India Limited since April Mr. Li holds a B.S. degree in Computer Engineering from Stanford University. 18. The statement that Mr. Li held a B.S. from Stanford University was false and misleading because Mr. Li had not completed the Computer Engineering program of study at Stanford and has not been issued a Bachelor of Science degree. Post-Offering Events 19. The nature of the problems at Rediff were necessarily in existence at the time of the IPO but were not disclosed in the Prospectus, and manifested themselves following the Offering to the detriment of its business and stock price. 20. On March 22, 2001, Rediff issued a press release warning that "sales in the fourth quarter to March are expected to fall percent from the third quarter." In addition to revealing slumping sales, the press release also reported Rediff expected "a loss per ADS of cents in the year to March." Rediff also announced, in the press release, that it will pay $13 million to acquire Value Communications Corp., and India Abroad Communications, two U.S. based companies. 21. Also on March 22, 2001, the International Herald Tribune issued an article questioning whether Mr. Richard Li had indeed graduated from Stanford University, as Rediff had represented in the Prospectus. Mr. Li had not admitted to the charge until April 2, 2001, at - 7 -

8 which point he was quoted in several publications. On April 3, 2001, The Business Times Singapore published an article quoting Mr. Li as stating that "I made a mistake...but if I knew the reaction would be so strong, I would have corrected [the inaccuracies]". Mr. Li attempted to downplay the incident by stating that "Our lawyers' advice is that we will at most pay a small fine." 22. On May 2, 2001, Rediff stock price closed at $3.20 per ADS -- a 73% decline from the $12 per ADS Offering price. COUNT I [Against All Defendants For Violations Of Section 11 Of The Securities Act] 23. Plaintiffs repeat and reallege each and every allegation contained above as though fully set forth herein. 24. This cause of action is brought by plaintiffs pursuant to Section 11 of the Securities Act, 15 U.S.C. 77k, on behalf of the Class against all defendants. 25. The Registration Statement, which contained the Prospectus for the Initial Public Offering, was inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and concealed and failed adequately to disclose material facts as described above. 26. Rediff is the registrant for the ADSs sold to plaintiffs and other members of the Class. Rediff issued, caused to be issued and participated in the issuance of materially false and misleading written statements to the investing public which were contained in the Registration Statement. As an issuer of the ADSs, Rediff is strictly liable to plaintiffs and the Class for the material misstatements or omissions

9 27. Each of the Individual Defendants were directors and/or executive officers of Rediff at the time of the Offering, and defendant Balakrishnan signed the registration statement. 28. Each of the Underwriter Defendants was an underwriter of the Rediff ADSs as that term is used in Section ll (a)(5) of the Securities Act. 29. The defendants named herein were responsible for the contents and dissemination of the Registration Statement and the Prospectus. None of the defendants named herein made a reasonable investigation or possessed reasonable grounds for believing that the statements contained in the Registration Statement and Prospectus were true and did not omit any material facts and were not materially misleading. 30. Plaintiffs and the members of the Class acquired Rediff ADSs pursuant to, or traceable to, the Registration Statement and did not know of untrue statements or omissions of material facts. 31. Plaintiffs and the Class have sustained damages. Less than one year has elapsed from the times of the violations and facts upon which this Complaint is based to the time of filing this Complaint. Less than three years have elapsed from the time that the Rediff ADSs were bona fide offered to the public to the time of filing this Complaint. COUNT II [Against The Underwriter Defendants For Violations Of Section 12(a)(2) Of The Securities Act] 32. Plaintiffs repeat and reallege each and every allegation contained above

10 33. This Count is brought by plaintiffs pursuant to Section 12(a)(2) of the Securities Act on behalf of all purchasers of Rediff ADSs in connection with, and traceable to, the Offering. 34. Rediff, the Individual Defendants, and the Underwriter Defendants, were sellers and offerors of the shares offered pursuant to the Prospectus. 35. The Prospectus contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and concealed and failed to disclose material facts. Defendants' actions of solicitation included participating in the preparation of the false and misleading Prospectus. 36. The defendants owed to the purchasers of Rediff ADSs, including plaintiff and other class member purchasers of Rediff ADSs, the duty to make a reasonable and diligent investigation of the statements contained in the Offering materials, including the Prospectus contained therein, to ensure that such statements were true and that there was no omission to state a material fact required to be stated in order to make the statements contained therein not misleading. These defendants knew of, or in the exercise of reasonable care should have known of, the misstatements and omissions contained in the Offering materials as set forth above. 37. Plaintiffs and other members of the Class purchased or otherwise acquired Rediff ADSs pursuant to and traceable to the defective Prospectus. Plaintiffs did not know, or in the exercise of reasonable diligence could not have known, of the untruths and omissions contained in the Prospectus. 38. Plaintiffs, individually and representatively, hereby offer to tender to defendants those ADSs which plaintiffs and other Class members continue to own, on behalf of

11 all members of the Class who continue to own such securities, in return for the consideration paid for those securities together with interest thereon. Class members who have sold their Rediff ADSs are entitled to recissory damages. 39. By reason of the conduct alleged herein, these defendants violated, and/or controlled a person who violated, 12(a)(2) of the Securities Act. Accordingly, plaintiffs and members of the Class who hold Rediff ADSs purchased in the Offering have the right to rescind and recover the consideration paid for their Rediff ADSs and hereby elect to rescind and tender their Rediff ADSs to the defendants sued herein. Plaintiff and Class members who have sold their Rediff ADSs are entitled to recissory damages. 40. Less than three years elapsed from the time that the Rediff ADSs were sold to the public to the time of the filing of this action. Less than one year elapsed from the time when plaintiffs discovered or reasonably could have discovered the facts upon which this Count is based to the time of the filing of this action. COUNT III Against the Individual Defendants For Violations of Section 15 of the Securities Act 41. Plaintiffs repeat and reallege each and every allegation contained above as though fully set forth herein. 42. This cause of action is brought by plaintiffs pursuant to Section 15 of the Securities Act, 15 U.S.C. 770, on behalf of the Class against the Individual Defendants

12 43. Rediff is liable as an issuer under Section 11 of the Securities Act as set forth in the first cause of action herein. 44. Each of the Individual Defendants was a control person of Rediff by virtue of their position as directors and/or senior officers of Rediff. The Individual Defendants each had a series of direct and/or indirect business and/or personal relationships with other directors and/or major shareholders of Rediff. 45. Each of the Individual Defendants was a culpable participant in the violations of Sections 11 and 12(a)(2) of the Securities Act alleged in Counts I and II above, based on their having signed the Registration Statement and/or having otherwise participated in the process which allowed the Offering to be successfully completed. JURY DEMAND 46. Plaintiffs hereby demand a trial by jury. PRAYER FOR RELIEF WHEREFORE, plaintiffs pray for judgment as follows A. Declaring this action to be a plaintiffs' class action properly maintained pursuant to Rule 23 of the Federal Rules of Civil Procedure and certifying plaintiffs as Class representatives and plaintiffs' counsel as Class counsel. B. Awarding plaintiffs and the Class damages and statutory compensation against each defendant, jointly and severally, and in favor of plaintiffs and all other members of the Class, in an amount to be determined to at trial plus pre-judgment interest thereon;

13 C. Awarding plaintiffs and the Class the costs and expenses of this litigation, including reasonable attorneys' fees and experts' fees and other costs and disbursements; and, D. Awarding plaintiffs and other members of the Class such other and further relief as this honorable Court may seem just and proper. Dated May 3, 2001 MILBERG WEISS BERSHAD HYNES & LERACH LLP By Steven G. Schulman (SS-2561) Samuel H. Rudman (SR-7957) Andrei V. Rado (AR-3724) One Penn Plaza, 49th Floor New York, New York (212) CAULEY GELLER BOWMAN & COATES, LLP Howard K. Coates, Jr. Jack Reise One Boca Place 2255Glades Rd., Ste. 421A (561) SCHIFFRIN & BARROWAY, LLP Marc A. Topaz Three Bala Plaza East Suite 500 Bala Cynwyd, PA (610) LAW OFFICE OF BERNARD M. GROSS, P.C. Deborah R. Gross

14 1500 Walnut Street 6 th Floor Philadelphia, PA (215) BRODSKY & SMITH, L.L.C. Evan J. Smith 11 Bala Avenue, Suite 39 Bala Cynwyd, PA (610) LAW OFFICES OF BRIAN FELGOISE 230 S. Broad Street, Suite 404 Philadelphia, PA (215) Attorneys for Plaintiffs