Uti Questions Maharashtra Fiat To Sicom: Uwb Case

The Unit Trust of India (UTI) has questioned the Maharashtra government's directive to the state industrial development corporation, Sicom, asking it to nominate four directors on the board of the United Western Bank.

The public sector mutual fund has taken the line that with the privatisation of Sicom, the government has no right to issue such directives. The state government holds 49 per cent stake in Sicom, while UTI has 40 per cent. The balance 11 per cent is held by a slew of corporates and employees.

UTI has reasoned that Sicom is not a company incorporated under Section 617 of the Company's Act, 1956. In such companies, the government holds a controlling stake and can consequently issue such directives.

 

UTI has dashed off a letter to the institution's board also seeking to know whether the Reserve Bank of India's (RBI) permission was sought before issuing such a directive. Sicom, being registered as a non-banking finance company with the RBI, is subject to the banking regulator's jurisdiction.

"At the heart of the dispute is whether the state government can intervene when it has privatised Sicom. UTI wants the Sicom to be run professionally and further seeks that an arm's length distance be maintained between the institution and the government. It is also proposing that the state government divest further in Sicom in order to facilitate this arm's-length relationship," sources familiar with the development said.

Senior officials of UTI as well as Sicom declined to comment on the issue. The latest twist comes at a time when Sicom, which holds 10 per cent stake in UWB, is pressing for appointment of four additional directors on the board of the bank at the behest of the state government.

The institution, which has two directors -- A K D Jadhav and Sharad Upasani -- on UWB's board, is now seeking to appoint P C Shejwalkar, S Jambunathan, Ramesh Venkat and P B Kulkarni. The resolution proposing this was moved at the annual general meeting of the bank on August 23 at Satara in Maharashtra.

The outcome of the voting on the resolutions at the meeting is mired in controversy as there have been charges that the proxy votes are not in order. At present, this is being probed by the Company Law Board.

The single largest shareholders in UWB are the Makharias of the Emtrex group who hold a 14 per cent stake . The existing management has only a marginal stake of less than one per cent stake and are opposed to granting additional representation to the government. The balance stake in the bank is widely dispersed among 55,000 individual shareholders.