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PIL challenging US-64 withdrawn

The Bombay high court, on technical grounds, on Friday allowed National Association of Small Investors to withdraw its public interest litigation challenging the recent decision of Unit Trust of India to suspend sale and repurchase of units under US-64 scheme.

The PIL, filed by National Association of Small Investors president Pradeep Bhavnani, came up for hearing before a bench headed by Chief Justice B P Singh.

The judges sought to know from the petitioner how many investors owing allegiance to NASI had been affected with UTI'S decision and how much was their investment involved in US-64 scheme.

The bench also opined that a resolution of NASI's committee to move the high court should have been annexed to the PIL.

Counsel for the petitioner, Atul Malgaonkar, sought permission to withdraw the PIL and file afresh after removing the technical objections.

The PIL prayed that suspension of sale and repurchase of units under this scheme be lifted and UTI be directed to repurchase the units at the same price offered to investors.

The PIL contended that the yield to the investors based on the present 10 per cent dividend was a mere 6.67 per cent, even below the prevailing the bank interest rate per annum.

NASI contended that there was no clause in the agreement or conditions for investment about temporary suspension of freeze on sale and repurchase of units under this scheme.

Therefore, UTI had no right to issue the impugned order.

The PIL alleged that large corporate homes like Reliance, petroleum giants such as BPCL, IPCL, IOC and multi-nationals were among the investors of US-64 scheme. Prior to the abrupt suspension of sale and repurchase of units under this scheme, many companies had redeemed their investment.

Between March and April an estimated Rs 41.41 billion was redeemed of which corporate investment was to the tune of Rs 40 billion, the PIL said and demanded a CBI inquiry into the circumstances leading to UTI's impugned decision.

UTI, on the other hand, strongly defended its stand of freezing or suspending sales and repurchase of units under US-64 scheme and told the court that it had taken such a

decision in view of continuous fall in the Sensex which resulted in deterioration of net asset value.

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, UTI said.

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