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UTI justifies move on US-64; PIL adjourned

The Unit Trust of India on Wednesday strongly defended its stand of freezing or suspending sales and repurchase of units under US-64 scheme and told the Bombay high court that it had taken such a decision in view of continuous fall in the Sensex which resulted in deterioration of net assets value.

In reply to a public interest litigation challenging the impugned decision, UTI's general manager (legal) S C Dikshit filed an affidavit justifying the financial institution's impugned decision.

The PIL, filed by National Association of Small Investors president Pradeep Bhavnani, was then adjourned to August 10 to enable the petitioners to file a rejoinder.

UTI claimed that the impugned decision of July 2 was perfectly legal and taken as a precautionary measure to enable the scheme to improve its position and consolidate it so that no further losses was caused to existing shareholders.

UTI said the decision was taken in a board meeting by a unanimous resolution. Of the nine members on the board, six attended the meeting and voted in favour of the resolution.

The requisite quorum for the board meeting was four under UTI regulations, the affidavit pointed out.

The financial institution denied that it controlled Rs 600 billion to Rs 750 billion of investors' money as alleged by the PIL.

The total assets under management of UTI was in the region of Rs 566.82 billion, the affidavit said.

UTI said it was in the process of converting its sale and purchase price on the basis of NAV in terms of the recommendations of Deepak Parekh committee.

The equity to debt ratio was also gradually being reduced, but the process was time consuming and taken keeping in view the equity market and market conditions.

As of now the ratio was 65:35, UTI claimed. UTI said there was absolutely no merit in the allegation levelled by the petitioner that the resignation of its former chairman P S Subramanyam was indicative of the correctness or otherwise of the impugned decision.

UTI also denied that financial institutions had already redeemed their contributions by 90 per cent. The contribution made by financial institutions under section 4 of the act continued to remain the same.

UTI also refuted allegations that on July 2 when the impugned decision was taken, only trustees of the financial institutions were absent. On the contrary, the resolution was passed unanimously with valid quorum in accordance with rules and regulations, it contended.

UTI did not agree with the petitioner that there was any guaranteed liquidity in units of US-64 scheme.

The financial institution denied that redemption by large corporate homes was due to alleged advance information or insight into its alleged murky financial disorder.

UTI said even an individual apart from financial institutions have access to information relevant to NAV.

The scheme is public and there was nothing confidential about it.

The state of stock exchange was also not a secret. The movement of the stock exchange were creditable by all financial analysts, UTI said.

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