Rediff India Abroad
 Rediff India Abroad Home  |  All the sections

Search:



The Web

India Abroad




Newsletters
Sign up today!

Article Tools
Email this article
Top emailed links
Print this article
Contact the editors
Discuss this article
Home > Business > Business Headline > Report


Bajaj sues UTI on fund closure

BS Bureau in Mumbai | February 10, 2005 09:31 IST

Bajaj Auto has filed a suit against UTI Mutual Fund in the Bombay high court for prematurely winding up the bonus plan of its Growth & Value Fund on December 31, 2004. This is the first time an Indian company has dragged the mutual fund giant to the courts.

The two-wheeler company had invested around Rs 80 crore (Rs 800 million) in the scheme, accounting for 60 per cent of the scheme's portfolio. After a preliminary hearing, the matter was posted for hearing tomorrow. Incidentally, two other investors, from Jaipur and Pune, have filed similar petitions.

The high court has told UTI Mutual Fund to pay investors in the scheme. However, Bajaj Auto's plea for an interim stay on the winding-up process was not granted by the court.

The company has also made the Securities and Exchange Board of India a respondent in the petition, challenging the market regulator's circular, which stipulates that mutual fund schemes should have a minimum investor base of 20 and each investor should not hold more than 25 per cent of the portfolio.

The scheme had to be automatically wound up since it did not conform to this rule.

Ashutosh Bishnoi, chief marketing officer, UTI MF when contacted, said the matter was sub-judice and as such, the fund house could not make any comments. The payment to the investors would be in the region of Rs 100-odd crore, sources said.

Bajaj Auto contended that winding up the bonus plan before the end of the first year exposes the unit holders to additional tax and interest, and, therefore, defeats the entire purpose of investing in the plan. The company could have availed of tax exemption if it had stayed invested for a year under the new capital gains tax rules.Sanjiv Bajaj, executive director (finance), Bajaj Auto, was not available for comment but according to court papers, a copy of which is in Business Standard's possession, the company had invested Rs 80 crore (Rs 800 million) in UTI Growth & Value Fund (formerly IL&FS Growth & Value Fund).

Under the UTI Growth & Value Fund, a new plan called UTI Growth & Value Fund-Bonus Plan was introduced in March 2004 and immediately on March 26, 2004, bonus units in the ratio of three units for every two units were issued.

On February 2, 2005, however, through an advertisement in the newspapers, UTI MF announced the winding up of this plan in line with the Sebi directive.

Bajaj Auto's main contention is the scheme was wound up because of certain extraneous reasons and, therefore, investors should not be penalised for it.

Powered by

Share your comments


Advertisement






Copyright 2005 Rediff.com India Limited. All Rights Reserved.