Only MF that has filed cases against wilful defaulters sees some recoveries

The oldest mutual fund in the country is also the only one to figure in the list of institutions who have filed cases against wilful defaulters.

UTI mutual fund has 27 cases with an amount of Rs 252.6 crore outstanding, according to data from TransUnion Cibil, which maintains a database of such cases.  This is based on accounts where defaults are of one crore rupees or more. The cases show a significant decline from five years ago.

There were 90 cases worth Rs 848.8 crore at the end of 2014. This has come down by around a third as of December 2018. The cases were the outcome of investments made at the time of the undivided UTI, in the early 2000s, according to a spokesperson.

“…these assets pertain to erstwhile Unit Trust of India, cases with respect to these were filed before the year 2003. As majority of these Companies are in Liquidation, only some legal cases are in continuity,” said the person in an e-mailed response.

The asset manager had completely written off the investments at the time. They are now seeing some recoveries, according to the person.

 “These investments were made prior to the bifurcation of UTI before March 1, 2003 and were fully written off. Over a period of time, we have recovered the amount from many defaulters. However, in few cases, the recovery is in process and efforts are made to settle and close the matter,” it said.

The amounts are being credited to the schemes which made the original investments, according to the spokesperson.

Interestingly, the database shows separate listings for the Specified Undertaking of Unit Trust of India (Suuti). This was formed to handle some of the assets of UTI after the fund was split in two following the collapse of the asset managers’ assured return schemes. It had 178 cases worth Rs.2551.3 crore in 2014. This is down to 89 cases worth Rs.1282.8 crore as of December 2019. 

The biggest defaulter is Maharashtra-based Malvika Steel. It owes Suuti Rs 420.75 crore. Marwar Hotels is the biggest defaulter for UTI mutual fund, which lists its cases separate from Suuti.

UTI declined to comment on the extent of recoveries.

The mutual fund has been in the middle of a struggle between shareholders. Four public sector companies each own 18.24 per cent. They include Bank of Baroda, Life Insurance Corporation of India, State Bank of India, and Punjab National Bank.  International asset manager T Rowe Price is the largest shareholder with 26 per cent stake. Principal Financial Group has bought out Punjab National Bank's stake in their mutual fund joint-venture. The other three continue their own mutual fund operations.

The Securities and Exchange Board of India requires that one entity can only sponsor one mutual fund. It had given time till March for the institutions to bring down their stake to ten per cent each.

Meanwhile, UTI has been without a chief executive since August 2018. This is when the term of Leo Puri, the previous head, ended. Chief finance officer Imtaiyazur Rahman is currently the acting head of the fund. 

A planned initial public offer by the UTI has also been in limbo because of the conflict between shareholders.