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The Unit Trust of India is the largest mutual fund in the country created in 1964 through an act of Parliament. UTI's scheme of US-64 was set-up specifically to
channel
small
savings
of
citizens
into
investments
giving
respectable
returns/interest. The US-64 scheme had 2 crore investors, the bulk of whom were small savers, retired people, widows and pensioners. US-64 has been most popular, giving returns as high as 18% in 1993 and 1994. In 1998, the UTI crashed, and the BJP-led NDA government organised Rs. 3,500 crore bail-outs to UTI. BJP Government appointed P.S. Subramanyam as the new UTI chief, as he had the backing of the PMO.
It was also said that Jayalalitha had pressurized the NDA government for appointing Subramanyam, in lieu of her continuing support to the Centre. Subramanyam strengthened his relationship with corporate big-wigs with the help of Small investors funds deposited with UTI, showered favours on Government favourites, and invested huge amounts in junk bonds. In August 2000, after prices of software stocks had begun to crash, Subramanyam (UTI) purchased 3.45 lac shares of a relatively
Cyberspace promoters, Arvind Johri and Anand Johri have RSS connections. Initially the UTI hierarchy had opposed purchase but subsequently, after four days, agreed to the purchase. In less than a year's time, the share price plummeted to just Re. 1. This investment, coupled with other shoddy investments, resulted in staggering financial losses to the UTI and investors. Within no time the bigwigs redeemed their investments with UTI, amounting to Rs. 4,000 crores. The shameful part is that they were re-purchased at the price of Rs. 14.20 per unit (face value Rs.10), when in fact its actual value (net asset value) was not more than Rs. 8. As a result, UTIs small investors lost a sum of Rs. 1,300 crores
Former
- M M Kapur and S K Basu -- and a stockbroker Rakesh G Mehta, were arrested in connection with the 'UTI scam'.
The
Liberalisation of the economy immediately led to the liberalisation of the UTI. Further liberalisation was pushed by Chidambram, as
stock,
such as Himachal Futuristic, Zee Telefilms, Global Tele, DSQ, etc. shares even when their market value began to crash in mid-2000, in order to prop up the share values of these stocks. The UTI also invested in junk bonds like Pritish Nandy communications (Rs. 1.5 crores), Jain Studios(Rs.5 crores), etc. This amounted to nothing but handing over peoples money (investments) to the rich and powerful. Thereby thousands of crores were siphoned off to big business and prominent
individuals, with the UTI chairman, bureaucrats and politicians taking their
cuts.
With knowledge that the UTI was in a state of collapse, the Chairman organised a high profile propaganda campaign promoting UTI .while at the same time leaking information to the big corporates to withdraw their funds. The Chairman thereby duped the lakhs of small investors through false propaganda.
On July 4, 2001 the board of UTI took the step of freezing the purchase and sale of all US-64 UTI shares for six months. Simultaneously it declared a pathetic . dividend of 7% . which is even lower than the interests of the banks and post office saving schemes. In other words the 2 crore shareholders could not re-invest their money elsewhere and would have to passively see their share price erode from Rs. 14 to Rs 8.
In the wake of these developments, Subramanyam was forced to resign. Finance Ministry did not order a probe into what went wrong with the investment pattern of the US-64, which resulted in the suspension of the scheme and loss to small investors.
Imagine
put a large part of his/her PF, gratuity etc. in the US-64 scheme, considering it the safest possible investment. Not only has the persons income halved overnight, he/she also stands to lose a large part of the investment.
The
Both
the Union government and the Unit Trust of India (UTI) have
failed to take any action against UTI officials, as well as against corporates exposed by the Tarapore committee way back in January 2002.
The
market transactions done by UTI in shares of 89 companies identified by the Tarapore committee.
Both the government and UTI have failed to finalize any proceedings against the accused other than referring a few cases to the Advisory Board
officials and leading corporate, UTI ordered an audit of the investment decisions taken in 19 firms. But no action has been taken against these companies or against the concerned UTI officials.
.
The
reference to civil proceedings against ex- chairman PS Subramaniam and other former UTI officials, "UTI is seeking an external legal specialist and further action will be considered on their advice."
On
Fearing
2001.
The
UTI Act was repealed and the institution was bifurcated into two parts
UTI Mutual Fund was created as a SEBI registered fund like any other
mutual fund. The assets and liabilities were taken over directly by the
Government in a new entity called Specified Undertaking of UTI, SUUTI.
In order to distance Government from running a mutual fund the ownership was transferred to four institutions; namely SBI, LIC, BOB and PNB, each owning 25%.
Certain reforms like improving the salary from PSU levels and
effecting a VRS were carried out .
PROCEEDINGS
Aug 14, 2001 Arvind johari, promoter of lucknow-based cyberspace infosys ltd, held on the charge of misappropriating unit trust of india funds to the tune of rs 32.08 crore, on conditional bail by a special court. the designated judge, S R mehra, released him on bail in the sum of rs 7.5 lakh with one or two sureties of the like amount. in the alternative, johari was allowed to furnish cash bail of rs 7.5 lakh.
The registrar of the court was directed to issue an urgent memo to the
superintendent of central prison to hand over the custody of johari to the CBI so that he could be taken to lucknow for production in another case pending against him. He was restrained from visiting offices of UTI and financial institutions such as LIC, GIC, SBI capital market and BSE.
johari's lawyer Mahesh jethmalani argued that his client was in custody since
july 24 and had cooperated with the investigating agency. his custodial interrogation was not required because documents had already been seized by the CBI. CBI prosecutor, Gopal sharan, on the other hand, argued that johari was the brain behind the uti scam and would tamper with evidence if bail was granted. his role vis-a-vis co-accused and his nexus with other persons or public financial institutions could be unearthed even if johari was not in custody, the judge felt. "i am therefore inclined to grant him bail on certain terms and conditions," remarked special judge s r mehra. the judge, however,
made it clear that if johari sought bail from the magistrate's court in lucknow
he should make himself available to the cbi in mumbai as and when required in the uti scam case. perusing case dairies and remand application, the judge remarked, "they show that investigation is progressive and regular."
on august 7,
the court granted bail to co-accused, p s subramanyam (former uti chairman), s k basu and m m kapur (suspended uti executive directors) and
broker rakesh mehta. the accused are charged with conspiracy to cause
wrongful loss to uti to the tune of rs 32.08 crore by subscribing to 3,45,000 shares of m/s cyberspace infosys in a private placement at an exhorbitant
shares. the agency alleged that johari had paid rs 50 lakh bribe to these
officials through broker rakesh mehta to strike the deal. opposing his bail, the CBI said that johari was the main brain behind the entire conspiracy and had masterminded misappropriation of funds to the tune of rs 32.08 crore. .
UTI
Systematic study of its problems role and functions was carried out with the help of a reputed international consultant.
Fresh
structure was changed to focus on newly emerging investor and distributor groups and massive changes in investor services and funds management carried out.
Once
Some
PRESENTED BY: Arun Gupta Isha bandral Lakhan khajuria Shivali sharma