Bombay High Court adjourns hearing in UTI Mutual Fund matter

Petitioner T Rowe Price seeks more time to hold discussions with stakeholders; Puri demits office

The Bombay High Court on Monday adjourned the hearing on a writ petition filed by T Rowe Price in the matter of UTI Mutual Fund (MF). The US-based firm sought more time to explore the possibility of settling the matter through discussions with the involved parties. The hearing was adjourned by consent.

According to sources, the finance ministry, which is one of the respondents in the writ petition, is also open to discussing the matter.

As one of the directions sought in the petition pertained to extension of UTI MF’s Managing Director Leo Puri’s tenure, the matter was pushed up for hearing to the same day Puri’s term was to end. As things stand, Puri’s five-year term came to an end on Monday. The UTI MF chief was also not in favour of an extension amid differences among board members. Meanwhile, Imtaiyazur Rahman, chief financial officer of the fund house, was named interim chief on Monday. 

According to sources, UTI board will be meeting on August 21 to discuss the appointment process for the asset managing company’s (AMC’s) top post. A query sent to UTI MF went unanswered.

The possibility of Puri coming back would depend on the ensuing discussions between the stakeholders. If the stakeholders are unable to find a solution, the matter could be debated before the court during the next hearing slated for August 28.

The US-based asset manager T Rowe Price, which holds 26 per cent strategic stake in UTI MF, in its petition has sought extension of Puri’s term by 12 months or any such period as deemed fit by the court to ensure UTI MF’s long-planned initial public offering (IPO) does not get further delayed.

T Rowe, the only private sector shareholder in UTI MF, has also sought directions for market regulator Securities and Exchange Board of India (Sebi) and the government to ensure the four state-owned shareholders in UTI MF cut down their respective stakes below 10 per cent, in line with cross-holding norms.

Sebi regulations stipulate that no sponsor of an MF can own over 10 per cent in more than one fund house. Rules also bar a single entity from having representation on the board of an AMC or trustee company of more than one MF. Entities have been given time till March 2019 to comply with these norms.

All the state-owned shareholders in UTI MF — Life Insurance Corporation of India, Bank of Baroda, State Bank of India, and Punjab National Bank – also operate separate AMCs.

Without naming anyone in particular, T Rowe Price Spokesperson Edward Giltenan earlier told Business Standard, “They have created conditions that prevent timely compliance with Sebi’s regulation, requiring each of them to sell below 10 per cent.”

He added, “...certain conflicted board members have begun acting as a block, disrupting board governance, and seeking to create a gap in leadership, apparently to delay progress toward selling down their stakes.”