As reported by Souvik Sanyal 19 Jun, 2008, ET Bureau
NEW DELHI: UTI Mutual Fund, the third-largest asset management company in India, could be made accountable under the Right to Information Act. In a move that could allow investors to seek data on the company’s financial management, the Central Information Commission (CIC) would soon consider whether the financial control and profit sharing pattern of UTI Asset Management Company (AMC) calls for public accountability under the transparency law.
Primarily, the panel would consider whether the company is substantially financed and if its affairs are controlled by the government. The company has been jointly promoted by SBI, Life Insurance Corporation, Punjab National Bank and Bank of Baroda, with each holding 25% stake.
With the law not clear as to what constitutes “substantial financing” by the government, the CIC is expected to peep into the AMC’s financial transactions to see if it has received any financial support from the government.
The RTI Act 2005 states that any institution established by the government or in receipt of direct or indirect funds from the government shall have to comply with the provisions of the law.
While UTI AMC argued that government did not have control over its management affairs, the statutory panel is expected to look at the control exerted by the promoters on the company’s financial aspects.
In its order, the CIC has sought from the company last two years of balance sheets, articles and memorandum of association and details about its profit-sharing pattern. The CIC would also be considering the mode of appointment of directors of the company, to understand the government’s influence on the company board.
UTI AMC has been appointed as the asset management company of the UTI Mutual Fund on December 9, 2002, and manages a corpus of over Rs 54,652 crore as on May 31, 2008.
Investors have taken the RTI route to get hold of closely-guarded financial data. Notably, the CIC had last year directed stock exchanges and SBI’s financial services arm, SBI Cards, to set up an information redressal mechanism under the transparency law.
UTIAMC (Asset Management Company) has finally been declared as a Public Authority as defined in the RTI Act as per the attached order of CIC. It has now been asked to designate CPIO and CAPIO.
Some of the factors that went in favour of UTIAMC being declared a PA are:
1. The 4 shareholders are PA's. Although the RTI Act does not specifically state that a subsidiary or a entity financed by another PA is also a PA, the IC noted that where public money is involved, there should be transparency. "The four sponsors are public authorities and when they in turn own another entity, such an entity has to be treated as a pubic authority."
2. "Just because it is incorporated under the Companies Act it cannot claim that it is not a public authority as many of the public sector companies which are public authorities have been registered under the Companies Act"
3. "One important fact which goes against the claim of UTIAMC is that its accounts are audited by the C&AG in terms of Section 619B of the Companies Act. In terms of this Section, a company in which one or more corporations owned or controlled by the Government-State or Central- holds more than 51% shares, then it shall be deemed to be a government company for the purposes of audit by the C&AG."
MUMBAI: This will bring cheers to lakhs of mutual fund investors who are worried about their investment parked with various pubic sector financial institutions in the country.
In a landmark order, the Central Information Commission (CIC), ruled that Unit Trust of India Asset Management Company is a public authority and thus it has to comply with the provisions of section 4 of the Right to Information (RTI) Act.
UTIAMC is the investment manager for UTI mutual funds which in turn invest public money in stock markets and debt instruments.
The CIC order on August 6, will now make it mandatory for UTIAMC to comply with section 4 for the RTI Act which states that public authorities need to maintain its records so that applicants can inspect or even ask for copies of the records.
The order comes after Dombivali resident Vijay T Gokhale approached CIC when UTI and SEBI replied to his RTI queries stating that UTI was not a public authority. "I approached the commission after UTIAMC replied that all its three entities, UTI mutual funds, UTI trustee company and UTI asset management company, do not fall under the ambit of the RTI Act," Gokhale said.
When the case came up for hearing at CIC, UTI officials argued that it was not a public authority as it is incorporated under Companies Act and SEBI.
"Even though the entire share capital of UTIAMC is held by four public sector banks, UTIAMC is a company registered under the Companies Act and is neither financed by the government nor controlled by it," the UTI official said.
The CIC then asked them to furnish copies of balance sheet, memorandum and articles, mode of appointment of directors, profit sharing pattern of the company and also reasons for retaining the UTI logo.
The CIC, in its order, said UTIAMC has been sponsored by public sector institutions and banks like SBI, PNB, LIC and Bank of Baroda.
"In other words, UTIAMC is owned by four public authorities. An institution wholly owned by a public authority could be considered to be a public authority under the RTI Act," the CIC order said.
"From the purpose and object of the RTI Act, it is crystal clear that there should be transparency in the functioning of any institution in which public money is deployed," the order said. The CIC, while passing the order directed UTIAMC to designate PIOs and appellate authorities to comply with the provisions the RTI Act in the next 30 days.
The complainant had approached CIC after he was refused certain information, including the balance sheet of UTI MF. He had argued that UTI MF, promoted by state-owned firms, ought to come under purview of the landmark act
Mumbai: The Bombay High Court today granted stay to UTI Mutual Fund on an order passed by the Central Information Commission (CIC) on the applicability of the Right To Information (RTI) Act on UTI entities.
"The High Court has granted a stay on the CIC order on the applicability of RTI 2005 on UTI Asset Management Company, UTI Mutual Fund and UTI Trustee Company," a company spokesperson told media in a statement here.
On a petition from an RTI activist, CIC had held last month that UTI MF is a public entity as it is promoted by four state-run companies. The body had also asked UTI MF to appoint a public information officer and an appellate authority.
Besides, the CIC had said that there should be transparency in the operations of any institution in which public money is deployed.
The complainant had approached CIC after he was refused certain information, including the balance sheet of UTI MF. He had argued that UTI MF, promoted by state-owned firms, ought to come under purview of the landmark act.
UTI MF, promoted by State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India, approached the court against the CIC order.
"With UTI MF securing the stay from the High Court, the case will now come up for further proceedings in due course," the spokesperson said.
The CIC order was expected to have implications on other AMCs such as SBI AMC and LIC AMC, companies which have state-owned promoters.