Unit Trust of India was created by the UTI Act passed by the Parliament

in 1963.For more than two decades it remained the sole vehicle for
investment in the capital market by the Indian citizens. In mid- 1980s public
sector banks were allowed to open mutual funds. The real vibrancy and
competition in the MF industry came with the setting up of the Regulator
SEBI and its laying down the MF Regulations in 1993.UTI maintained its
pre-eminent place till 2001, when a massive decline in the market indices
and negative investor sentiments after Ketan Parekh scam created doubts
about the capacity of UTI to meet its obligations to the investors. This was
further compounded by two factors; namely, its flagship and largest
scheme US 64 was sold and re-purchased not at intrinsic NAV but at
artificial price and its Assured Return Schemes had promised returns as
high as 18% over a period going up to two decades..!!
Fearing a run on the institution and possible impact on the whole market
Government came out with a rescue package and change of management
in 2001.Subsequently, the UTI Act was repealed and the institution was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 of
schemes where Government had to come out with a bail-out package were
taken over directly by the Government in a new entity called Specified
Undertaking of UTI, SUUTI. SUUTI holds over 27% stake Axis Bank. 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 UTI lost its market dominance rapidly and
by end of 2005,when the new share-holders actually paid the consideration
money to Government its market share had come down to close to 10%!
A new board was constituted and a new management inducted. Systematic
study of its problems role and functions was carried out with the help of a
reputed international consultant. Fresh talent was recruited from the private
market, organizational structure was changed to focus on newly emerging
investor and distributor groups and massive changes in investor services
and funds management carried out. Once again UTI has emerged as a
serious player in the industry. Some of the funds have won famous awards,
including the Best Infra Fund globally from Lipper. UTI has been able to
benchmark its employee compensation to the best in the market, has
introduced Performance Related Payouts and ESOPs.
The UTI Asset Management Company has its registered office at: UTI
Tower, Gn Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400
051.It has over 70 schemes in domestic MF space and has the largest
investor base of over 9 million in the whole industry. It is present in over
450 districts of the country and has 100 branches called UTI Financial
Centres or UFCs. About 50% of the total IFAs in the industry work for UTI
in distributing its products! India Posts, PSU Banks and all the large Private
and Foreign Banks have started distributing UTI products. The total
average Assets Under Management (AUM) for the month of June 2008
was Rs. 530 billion and it ranked fourth. In terms of equity AUM it ranked
second and in terms of Equity and Balanced Schemes AUM put together it
ranked FIRST in the industry. This measure indicates its revenue- earning
capacity and its financial strength.
Besides running domestic MF Schemes UTI AMC is also a registered
portfolio manager under the SEBI (Portfolio Managers) Regulations. It runs
different portfolios for is HNI and Institutional clients. It is also running a
Sharia Compliant portfolio for its Offshore clients. UTI tied up with Shinsei
Bank of Japan to run a large size India-centric portfolio for Japanese
investors.
For its international operations UTI has set up its 100% subsidiary, UTI
International Limited, registered in Guernsey, Channel Islands. It has
branches in London, Dubai and Bahrain. It has set up a Joint Venture with
Shinsei Bank in Singapore. The JV has got its license and has started its
operations.
In the area of alternate assets, UTI has a 100% subsidiary called UTI
Ventures at Banglore This company runs two successful funds with large
international investors being active participants. UTI has also launched a
Private Equity Infrastructure Fund along with HSH Nord Bank of Germany
and Shinsei Bank of Japan.


CREATING TRUST

UTI was established through a Parliament Act in 1964, to channelise the
nations savings via mutual fund schemes. This was done as in the earlier
days, raising the capital from markets was very difficult for the companies
due to the public being very conservative and risk averse. By February
2001, UTI was managing funds worth Rs 64,250 crore through over 92
saving schemes such as US-64, Unit Linked Insurance Plan, Monthly
Income Plan etc. UTIs distribution network was well spread out with 54
branch offices, 295 district representatives and about 75,000 agents across
the country.The first scheme introduced by UTI was the Unit Scheme-1964,
popularly known as US-64. The funds initial capital of Rs 5 crore was
contributed by Reserve Bank of India (RBI), Financial Institutions, Life
Insurance Corporation (LIC), State Bank of India (SBI) and other scheduled
banks including few foreign banks. It was an open-ended scheme,
promising an attractive income, ready liquidity and tax benefits. In the first
year of its launch, US-64 mobilized Rs 19 crore and offered a 6.1%
dividend as compared to the prevailing bank deposit interest rates of 3.75 -
6%. This impressed the average Indian investor who until then considered
bank deposits to be the safest and best investment opportunity. By October
2000, US-64 increased its capital base to Rs 15993 crore, spread over 2
crore unit holders all over the world.However by the late 1990s, US-64 had
emerged as an example for portfolio mismanagement. In 1998, UTI
chairman P.S.Subramanyam revealed that the reserves of US-64 had
turned negative by Rs 1098 crore. Immediately after the announcement,
the Sensex fell by 224 points. A few days later, the Sensex went down
further by 40 points, reaching a 22-month low under selling pressure by
Foreign Institutional Investors (FIIs). This was widely believed to have
reflected the adverse market sentiments about US-64. Nervous investors
soon redeemed US-64 units worth Rs 580 crore. There was widespread
panic across the country with intensive media coverage adding fuel to the
controversy.



The UTI scam
Former UTI chairman P S Subramanyam and two executive directors -- M M Kapur and S K Basu -- and a
stockbroker Rakesh G Mehta, were arrested in connection with the 'UTI scam'.
US-64 scheme of UTI was meant to collect money from investors and
channel it to high return instruments. P.S. Subramanyam, the then
chairman of UTI used the funds to promote some business houses, pass
the money to politicians and invest in junk bonds, all in return for fat
commissions. He helped some brokers and industrialists at the cost of the
investors funds finally the government had to bail out small time
investors with their own tax paying money !
Learning for the investor : There you have it. Even mutual funds can
bite the dust. DIVERSIFY intelligently across AMCs (Asset Management
Company). Dont put all your money into the same fund house. Each year,
check the percentage of money you have in each AMC and if you see a
huge exposure to any one, cut it down to size. Its better to be safe than
sorry.

Unit 64
Unhappy investors Quote in 1998

"They were invested blindly in stocks, they have cheated us. I am telling everyone to sell. If they
are stupid and offering Rs 14.25 for paper worth Rs 9, why should I let go of the opportunity?


In 1998, investors of Unit Trust of Indias (UTI) Unit Scheme-1964 (US-64)
were shaken by media reports claiming that things were seriously wrong
with the mutual fund major. For the first time in its 32 years of existence,
US-64 faced depleting funds and redemptions exceeding the sales.
Between July 1995 and March 1996, funds declined by Rs 3,104 crore.
Analysts remarked that the depleting corpus coupled with the redemptions
could soon result in a liquidity crisis. Soon, reports regarding the lack of
proper fund management and internal control systems at UTI added to the
growing investor frenzy. By October 1998, US-64s equity components
market value had come down to Rs 4200 crore from its acquisition price of
Rs 8200 crore. The net asset value (NAV) of US-64 also declined
significantly during 1993-1996 due to turbulent stock market conditions. A
Business Today survey cited US-64s NAV at Rs 9.68. The US-64 units,
which were sold at Rs 14.55 and repurchased at Rs 14.25 in October 1998,
thus were around 50% and 47%, above their estimated NAV. Amidst
growing concerns over the fate of US-64 investors, it became necessary for
UTI to take immediate steps to put rest to the controversy.
UT-64 Scam*
- The US-64 scheme had *2 crore investors, the bulk of whom were small
savers, retired people, widows and pensioners*.
- In 1998, the UTI crashed, and the BJP-led NDA government scrambled to
organise Rs. 3,500 crore bail-outs to UTI.
- The capital of UTI fell by 33% from 75,000 crores to 50,000 crores,
making this a 25,000 crores scam. Additionally public faith in financial
institutions was completely eroded.
- In a global recession such a mistake would be catastrophic, it would
retard and hamper the countrys chances of recovery turning it into a full
blown crisis.

Genisis of the Scam
The line between legitimate business and the mafia is getting increasingly diffused. The
greater the liberalisation/globalisation of the economy, the more rampant is the loot. Phoolan
Devi as a dacoit in the ravines of Madhya Pradesh could not even dream of the type of wealth
made as a Member of Parliament. Her wealth at the time of her death was estimated at a
minimum of Rs. 10 crores. But this is small fry compared to the Harshad Mehtas, Bharat
Shahs, Ketan Parekhs, Subramanyams etc and the top politicians/bureaucrats/corporate
houses with whom they are linked. Phoolan Devi appears as a petty thief compared to these
gangsters. The amount robbed through the UTI scam intails thousands of crores the bulk of
which belongs to small investors who have put their life-savings into this scheme.
What is the UTI ?
The Unit Trust of India is the largest mutual fund in the country created in 1964 through
an act of parliament. Mutual Funds are financal institutions that invest peoples money in
various schemes, giving a gauranteed return to the investor. The UTI (of which the US-64
scheme is the largest) was set-up specifically to channel small savings of citizens into
investments giving relatively large returns/interest. The US-64 scheme has 2 crore investors,
the bulk of whom are small savers, retired people, widows and pensioners. Besides the US-64
the UTI runs 87other schemes giving inverstors various options. But the US-64 has been most
popular, giving returns as high as 18% in 1993 and 94.
Genisis of the Scam
Liberalisation of the economy immediately led to the liberalisation of the UTI, throwing it
to the mercy of the stock market. In 1992, itself the US-64 scheme was changed from a debt-
based fund to one linked to equity. In 1992 only 28% of its funds was in equity; today it is
over 70%. Further liberalisation was pushed by Chidambram, as the finance minister of the U
F government, who, in 1997, removed all government nominees from the board of the UTI.
Besides, the US-64 does not come under SEBI regulations, its investment delails are kept
secret (ever depositors cannot know where their funds are being parked) and the chairman has
arbitrary powers to personally decide an investment upto a huge Rs 40 crores. Such
liberalisation is tailor-made for frauds. Not surprisingly, within one year of Chidambrams
liberalisation, in 1998, the UTI crashed, and the new BJP-led government organised a large
Rs. 3,500 crore bail-out to prevent default.
It was during this crisis that the new chairman, P.S. Subramanyam, was appointed.
Subramanyam was a direct appointee of thug Jayalalitha, who had made his selection a
condition for her continuing the support of the then NDA government. Later, though
Jayalalitha withdrew from the government, Subramanyam developed close links with the
Prime Ministers Office, and corporative big-wigs. Small investors funds were used to
promote big business houses, shower favours to politicians, and invest huge amounts in junk
bonds....all for a fat commission. Subramanyam functioned like a fascist, arbitrarily
transferring hundreds of senior staff, in order to cover his tracks. He was a key player in the
Ketan Parekh scam.
Huge amount of UTI funds were channelled into the infamous K-10 list of Keten Parekh
stock, such as Himachal Futuristic, Zee Telefilims, Global Tele, DSQ, etc. The UTI continued
to buy these shares even when their market value began to crash in mid-2000, in order to prop
up the share values of these stocks. The Trust saw its Rs. 30,000 portfolio (value of stocks)
lose half its value within a year since Feb. 2000.
To take just one example on how the UTI operated : In August 2000, much after the
software stocks had begun to crash, the UTI bought Rs. 34 crores worth of shares in
Cyberspace Infosys Ltd at the huge price of Rs 930 per share. Today the shares have no value
and its Lacknow based promoters, the Johari Group, are in jail. But, what is astounding is that
it was none other than Indias prime minister, Vajpayee, who, as late as Jan. 31, 2001, laid the
foundation stone for the Software Tectnology Park (STP) in Luknow, promoted by this group.
(Incidentally the UP government had a 26% share in this STP). Coincidentally, in the four
days when the UTI reversed its earlier decision and subscribed to 3.45 lakh shares of
Cyberspace, Subramanyam had rung up N.K. Singh (then secretary in the PMO) at least 4
times. It does not take much imagination to link UTI purchases in Cyberspace with Vajpayee.
Similar were the investments in DSQ Software, HFCL, Sriram Multitech. and others.
Besides, the UTI also invested in junk bonds like Pritish Nandy communications (Rs. 1.5
crores), Jain Studios(Rs.5 crores), Sanjay Khans Numero Uno International (Rs. 7.5 crores),
Malavika Spindles(Rs. 188 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.
But this was not all. The fraud continues even further. With knowledge that the UTI was in
a state of collapse, the Chairman organised a high profile propaganda campaign promoting
UTI (spending crores of rupees on the top advertising company, Rediffusion), 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, while allowing windfall
profits to the handfull of big corporates who had invesed in UTI.
So, in the two month prior to the freezing of dealings in UTI shares, a gigantic sum of Rs.
4,141 crores was redeemed. Of this Rs.4,000 crores (97%) were corporate investments. What
is more,they were re-purched at the price of Rs. 14.20 per share (face value Rs.10) when in
fact its actual value (NAV net asset value) was not more than Rs. 8. As a result UTIs
small investors lost a further Rs. 1,300 crores to the big corporates.
In fact these huge withdrawals further precipated the crisis. On July 4, 2001 the board of
UTI took the unprecedented step of freezing the purchase and sale of all US-64 UTI shares
for six months. Simultaneously it declared a pathetic dividend of 7% (10% on face-value),
which is even lower than the interests of the banks and post office saving schemes. Such
freezing of legally held shares is unheard of and is like overnight declaring Rs. 100 notes
as invalid for some time. 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 (at
which they would have purchased it) to Rs 8 and get interest at a mere 7% on their initial
investments. Fearing a back-lash, the government/UTI later announced the ability to
repurchase UTI shares at Rs. 10 i.e. at 30 % below the purchase price.
Imagine the plight of a retired person who would have 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 (interest/dividend) halved overnight, he/she also stands to lose a large
part of the investment. So, a person who invested Rs. 1 lakh would now only get back Rs
70,000.
Today, the entire middle class is being robbed of their savings first it was by the private
mutual funds (NBFCs), now by the govt. sponsored mutual fund. Those who gain are the
robber barons who run the countrys economics, finance, politics.
The middle-classes, affected by these scame, will soon realise the facts and come out of
the euphoria of consumerism that has numbed their senses. They will see through the hoax of
globalisation/liberalisation, and will turn their wrath on these so-called pillars of society. It is
important that this impending explosion be channeled in a revolutionary direction, or else it
will be diverted by the ruling elite into fatricidal clashes. The middle-classes are most prone
to fall prey to ruling-class propaganda. But life itself is the best educator. Faced with
unemployment, loot of their savings, price rise of all essentials, etc. they will no doubt, join
the working class and their peasant brethrens in revolt.



Patel moves SC in UTI scam case
Aviation minister was chief of Autoriders Finance, which had borrowed Rs 50 crore fromthe mutual fund
NEW DELHI: Civil aviation minister Praful Patel has moved the Supreme Court seeking quashing of a Bombay High
Court order that allowed a CBI probe against him in an alleged Rs 50 crore fraud in a 1993 UTI scam case.
The court allowed the additional chief metropolitan magistrate, Esplanade, Mumbais order that directed an aggrieved
petitioner, M Furquan, to approach the high court for a CBI probe into the scam.
Furquan had filed a complaint in the trial court saying that Patel was the chairman of Santacruz-based Autoriders
Finance Ltd, which had borrowed Rs 25 crore in 1993 and another Rs 25 crore in 1995 for setting up an auto finance
company in Mumbai.
The complainant is directed to take necessary steps to transfer this case to the CBI in the interest of specialised
investigation, by making appropriate application before the high court at Bombay as early as possible, the magistrate
ordered on September 12, 2006.
Patels petition in the apex court says that HC has accepted Furquans petition that was filed in pursuant to the trial
court order.
The impugned high court order is erroneous and results in miscarriage of justice. It is demonstrated by subsequent
facts that the magistrate has now passed an order on September 12, 2006, directing the complainant UTI to
approach the high court by filing appropriate application for seeking transfer of the case to the CBI, said Patel in the
petition seeking quashing of the high court order.
The trial of the UTI scam cases is going on before the magistrate in Mumbai.
The high court could not have and ought not to have issued directions relating to the manner in which the criminal
complaints should be investigated, conducted and proceeded with, Patel said.
The high court ought not to have entertained a purported PIL and interfere with the proceedings before a criminal
court which is proceeding as per the procedure provided under the CrPC, he added.
The so-called PIL was clearly motivated which was obvious from the reading of the petition itself as the petitioner
was seeking to gain political mileage by virtue of this position, said Patel.
The Autoriders Finance Ltd had purchased several vehicles out of the financial assistance and was renting out them
for commercial purposes.

DISTRUST IN TRUST
Unlike the usual practice for mutual funds, UTI never declared the NAV of
US-64 - only the purchase and sale prices for the units were announced.
Analysts remarked that the practise of not declaring US-64s NAV in the
initial years was justified as the scheme was formulated to attract the small
investors into capital markets. The declaration of NAV at that time would
not have been advisable, as heavy stock market fluctuations resulting in
low NAV figures would have discouraged the investors. This seemed to
have led to a mistaken feeling that the UTI and US-64 were somehow
immune to the volatility of the Sensex.Following the heavy redemption
wave, it soon became public knowledge that the erosion of US-64s
reserves was gradual. Internal audit reports of SEBI regarding US-64
established that there were serious flaws in the management of funds.
Till the 1980s, the equity component of US-64 never went beyond 30%.
UTI acquired public sector unit (PSU) stocks under the 1992-97
disinvestment program of the union government. Around Rs 6000-7000
crore was invested in scrips such as MTNL, ONGC, IOC, HPCL & SAIL.A
former UTI executive said, Every chairman of the UTI wanted to prove
himself by collecting increasingly larger amounts of money to US-64, and
declaring high dividends. This seemed to have resulted in US-64 forgetting
its identity as an income scheme, supposed to provide fixed, regular
returns by primarily investing in debt instruments.
Even a typical balanced fund (equal debt and equity) usually did not put
more than 30% of its corpus into equity. A Business Today report claimed
that eager to capitalise on the 1994 stock market boom, US-64 had
recklessly increased its equity holdings. By the late 1990s the funds
portfolio comprised around 70% equity. While the equity investments
increased by 40%, UTI seemed to have ignored the risk factor involved with
it. Most of the above investments fared very badly on the bourses, causing
huge losses to US-64. The management failed to offload the equities when
the market started declining. While the book value of US-64s equity
portfolio went up from Rs 7,943 crore (June 1994) to Rs 13,627 (June
1998), the market value had actually declined in the same period from Rs
18,334 crore to Rs 10,029 crore. Analysts remarked that UTI had been
pumping money into scrips whose market value kept falling. Raising further
questions about the fund management practices was the fact that there
were hardly any growth scrips from the IT and pharma sectors in the
equity portfolio.In spite of all this, UTI was able to declare dividends as it
was paying them out of its yearly income, its reserves and by selling the
stocks that had appreciated. This kept the problem under wraps till the
reserves turned negative and UTI could no longer afford to keep the sale
and purchase prices artificially inflated.Following the public outrage against
the whole issue, UTI in collaboration with the government of India began
the task of controlling the damage to US-64s image.

RESTORING THE TRUST

UTI realised that it had become compulsory to restructure US-64s portfolio
and review its asset allocation policy. In October 1998, UTI constituted a
committee under the chairmanship of Deepak Parekh, chairman, HDFC
bank, to review the working of scheme and to recommend measures for
bringing in more transparency and accountability in working of the scheme.
US-64s portfolio restructuring however was not as easy as market
watchers deemed it to be. UTI could not freely offload the poor performing
PSU stocks bought under the GoI disinvestment program, due to the fear of
massive price erosions after such offloading. After much deliberation, a
new scheme called SUS-99 was launched.
The scheme was formulated to help US-64 improve its NAV by an amount,
which was the difference between the book value and the market value of
those PSU holdings. The government bought the units of SUS-99 at a face
value of Rs 4810 crore. For the other PSU stocks held prior to the
disinvestment acquisitions, UTI decided to sell them through negotiations to
the highest bidder. UTI also began working on the committees
recommendation to strengthen the capital base of the scheme by infusing
fresh funds of Rs 500 crore. This was to be on a proportionate basis linked
to the promoters holding pattern in the fund.
The inclusion of the growth stocks in the portfolio was another step towards
restoring US-64s image. Sen, Executive Director, UTI said,
The US-64 equity portfolio has been revamped since June. During the last nine months the
new ones that have come to occupy a place among the Top 20 stocks from the (Satyam
Computers, NIIT and Infosys) and FMCG (HLL, SmithKline Beecham and Reckitt & Colman)
sectors. US-64 has reduced its weightage in the commodity stocks (Indian Rayon, GSFC, Tisco,
ACC and Hindalco.)
To control the redemptions and to attract further investments, the income
distributed under US-64 was made tax-free for three years from 1999. To
strengthen the focus on small investors and to reduce the tilt towards
corporate investors, UTI decided that retail investors should be
concentrated upon and their number should be increased in the scheme.
UTI also decided to have five additional trustees on its board. To enable
trustees to assume higher degree of responsibility and exercise greater
authority UTI decided to give emphasis on a proper system of performance
evaluation of all schemes, marked-to-market valuation of assets and
evaluation of performance benchmarked to a market index. The
management of US-64 was entrusted to an independent fund management
group headed by an Executive Director. UTI made plans to ensure that full
responsibility and accountability was achieved with support of a strong
research team. Two independent sub-groups were formed to manage the
equity and debt portion of US-64. An independent equity research cell was
formed to provide market analysis and research reports

NEWS ARTICLE OF SCAM
Prime accused in UTI scam gets bail
Aug 14, 2001.
mumbai: 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, was on tuesday released 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 on wednesday morning to the cbi so
that he could be taken to lucknow for production in another case pending against him. cbi was given
liberty to move the special court for production of johari in the uti scam case whenever required. johari
was directed not to leave india without the permission of the court and to cooperate with
investigations. 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. the judge observed that johari's custodial interrogation was not necessary. 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 price of rs 930 per share. cbi alleged that uti officials,
subramanyam, kapur and basu had allegedly reversed their own decision taken earlier to reject the offer
of buying these 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. the end use of these funds had yet to be traced


Govt yet to take action on UTI scam
MUMBAI: Both the Union government and the Unit Trust of India (UTI) have failed to take any action
against tainted UTI officials, as well as against corporates exposed by the Tarapore committee way back
in January 2002.

This is evident from the Action Taken Report (ATR) tabled before Parliament on May 10 about the JPC
report regarding the 2001 stock scam.

The final JPC report had recommended an enquiry of the secondary market transactions done by UTI in
shares of 89 companies identified by the Tarapore committee. It had also recommended departmental
action against UTI officials involved in Cyberspace scam.

Moreover, Tarapore panel had exposed the deals behind the US-64 crisis and how banks had privy
information regarding the ill-health of the scheme.

However, in terms of action taken against these findings, both the government and UTI have failed to
finalise any proceedings against the accused other than referring a few cases to the Advisory Board on
Banking, Commercial and Financial Frauds, a pre-investigative body under the finance ministry.

Some of the companies involved in these cases include Global Tele, DSQ Software, Essar Oil, Zee
Telefilms, Essar Steel and HFCL. UTI chairman M Damodaran was unavailable for comment.

After the Tarapore committee report unearthed the dubious deals between UTI officials and leading
corporates, 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 UTI-1 administrator has informed the government that with 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 UTI's role in the Calcutta Stock Exchange payment crisis, the government has directed SEBI to
intervene in the matter, since UTI has failed to initiate any action against its former ED BG Daga, who
has been indicted in the JPC report.

Sources said the regulator is expected to summon Daga for a hearing in this matter. SEBI has also
ordered an investigation to ascertain any broker nexus among Stock Holding Corporation (SHCL) officials






UTI scam: HC wants decision on cop report
MUMBAI: The Bombay high court on Wednesday directed the metropolitan magistrate to
decide on a Mumbai police report on investigations into the 1993-95 UTI scam of Rs 50 crore.
The court's orders came on a PIL filed by journalist M Furquan who has sought a CBI inquiry
into the scam, especially into the role of civil aviation minister Praful Patel whose named had
initially cropped up in the case.
The scam involves a loan of Rs 50 crore in 1993-95 for purchase of vehicles to Autorider
Finance Pvt Ltd. Patel was the chairman of the company at the time.
Subsequently, the money was allegedly used by the directors for personal purposes, according to
the PIL.
In 2004, UTI filed a compliant before a magistrate as the company failed to repay the loan.
While Patel's name had figured in the list of nine accused, UTI later applied to the court for
permission to drop the names of Patel and two other directors TNV Iyer and S Iyer.
The matter is to come up in the Esplanade magistrate's court on August 23. The police in its
report has asked for the case to be transferred to the CBI as it involves a huge amount.