The Hindu Business Line : Bajaj Auto moves court against winding up of UTI scheme

BAJAJ Auto Ltd (BAL) has sought court intervention to restrain Unit Trust of India (UTI) from winding up the UTI Growth & Value Fund-Bonus Plan. UTI wound up the scheme on January 31, as it failed to comply with relevant SEBI norms.

In a petition filed on Monday at the Bombay High Court, BAL has challenged the Securities and Exchange Board of India's December 2003 regulation requiring every mutual fund scheme to have at least 20 investors with none having investment in excess of 25 per cent of the fund's corpus. Failing this, the SEBI directive demanded that the scheme be wound up.

The cash-rich automobile company has challenged the regulation, as premature closure of the UTI scheme would entail additional tax and interest burden for BAL, which has sizeable investment.

The fund came into the UTI fold after IL&FS Mutual Fund decided to exit that business in May 2004. According to its petition, BAL had invested Rs 80 crore in the IL&FS Growth & Value Fund-Bonus Plan on March 25, 2004, redeeming Rs 32 crore four days later on March 29.

This fund, originally started in March 1999, was renamed UTI Growth & Value Fund - Bonus Plan following the transfer of IL&FS' mutual fund business to UTI.

In December 2004, citing the SEBI circular, UTI asked BAL to redeem units worth Rs 33 crore, being in excess of 25 per cent of the fund's corpus and no investor being allowed to hold more than 25 per cent.

On being told by BAL that the move would upset its investment strategy and cause additional tax and interest liability, UTI in subsequent discussions, advised the automobile company to encash units worth Rs 8 crore out of another plan, the UTI Bond Advantage Fund Bonus option before end-December.

BAL claims, it was assured that no further redemption would be needed under the UTI Growth & Value Fund-Bonus Plan. However, on January 31, 2005, UTI informed it that the said fund was to be shut down the same day and all investors would be refunded within 10 working days.

The letter requested BAL to redeem units worth Rs 41 crore from the scheme.

BAL's reply was on previous lines. It has also cited late receipt of the SEBI circular from UTI and non-disclosure of the circular in the offer document at the time of original investment in the IL&FS-run scheme.

The petition said, a meeting of unit holders "was purportedly held" on February 5, but no resolution was moved.

Respondents named in BAL's petition were UTI, UTI Mutual Fund, UTI Trustee Company Pvt Ltd, UTI Asset Management Company Pvt Ltd and the SEBI.

In its official statement on the issue, UTI Mutual Fund confirmed the UTI Growth & Value Fund-Bonus Plan was wound up on January 31, as it did not fulfil the requirements of the SEBI circular.

Two investors, Bajaj Auto Ltd and one Mr Vinod Agarwal, have among other things challenged the winding up of the scheme through writ petition filed before the Bombay High Court, it said.

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