UTI Officers' Association moves top court in 26% stake sale case

Bombay HC recently dismissed the case citing delay in filing

The Supreme Court has ordered an issue of notice to UTI AMC stakeholders State Bank of India, Bank of Baroda, LIC, Punjab National Bank and the government, along with T Rowe Price, in an appeal pertaining to the 26 per cent stake sale by the domestic sponsors of the AMC to the US-based asset manager in 2010.

The Bombay High Court (HC) had issued an order last year, impleading T Rowe as a respondent (to hear its views as an affected party) in the plea pertaining to the AMC's 2010 stake sale to the US firm. However, it recently dismissed the case on the grounds of delay in filing, which led the appellant, All India UTI AMC Officers' Association (AIUAOA), to approach the apex court.

The Association was represented by senior counsel Prashant Bhushan. T Rowe Price has filed a caveat and was present for the hearing. The next hearing will be on August 16.

UTI was divested in 2005 to four public sector entities - SBI, LIC, Bank of Baroda and Punjab National Bank.

In January 2010, the four sponsors sold 26 per cent stake in UTI AMC and UTI Trustee Company without public notice or inviting public bids for an undisclosed value. This stake sale was challenged by the AIUAOA in a writ petition before the Bombay HC in 2015.

Last year, the AIUAOA filed an interim application, pleading urgent hearing of the writ petition ahead of the AMC's initial public offering and to implead T Rowe Price as a respondent.

According to AIUAOA, UTI Trustee Company, which is the specified company created under section 2(h) of UTI Repeal Act 2002 can be held by only banks and financial institutions.

"T Rowe Price, a foreign institutional investor, does not fall under the definition of banks and financial institutions under UTI Repeal Act. In effect this stake sale for just Rs 3,11,200 is illegal," said a note by the Officers' Association.

Appeal against SAT order

Separately, on Friday, SBI, BoB and LIC moved the apex court against the Securities Appellate Tribunal (SAT) order that partly upheld Sebi’s decision to penalise them for failing to reduce their stakes in UTI AMC.

Earlier, Sebi had moved the apex court against the SAT order reducing the penalty. The SC, however, had directed a stay on the SAT order.

In its order on January 7, SAT had said that all three appeals were partly allowed by substituting the monetary penalty of Rs 10 lakh each imposed on the appellants with that of a warning.

"We do not find any justifiable reason to impose any monetary penalty in the present matters, as every technical violation need not be visited with monetary penalty. In these matters a warning is sufficient. Further, Sebi is at liberty to impose penalty for similar violations in future," the order had said.

Last year Sebi had fined SBI, LIC and BoB Rs 10 lakh each for not reducing their stakes in UTI AMC to below 10 per cent within the stipulated timeline. Each of the three entities were required to cut their stake to below 10 per cent by March 2019 from 18.24 per cent. This was as per Sebi’s cross-holding norms for mutual funds as LIC, SBI and BoB were the sponsors of LIC MF, SBI MF and Baroda MF as well.

UTI AMC slid nearly 0.6 per cent to close at Rs 843.7 apiece on the BSE on Monday. The stock has gained nearly 50 per cent in the last three months.