Uti Technology Services Ltd., Rep. by Its Managing Director Vs. Shri Locherla Ramanaji - Court Judgment

Excerpt:
.....the board of trustees of uti (board) was authorized to formulate plan or plans in relation to any unit scheme, under which a person acquired an interest in units. pursuant to section 21 of uti act, the board was authorized to formulate unit schemes for the purpose of providing facilities for participation in the income, profits, gains arising out of the acquisition, holding management or disposal of securities, interalia, covering various matters viz. issue of units and the face value of each unit, the form and manner of making the application etc. the scup was formulated by the board under section 21 of the uti act and the plan in relation to the scup under section 19(1) (8) © of the uti act. the scup was duly published in the gazette of india on 28th august 1993. scup was launched.....

Judgment:

(Typed to dictation of Smt.M.Shreesha, Honble Member)

Aggrieved by the order in C.C.No.305/2008 on the file of Dist Forum-1, Visakhapatnam , the opposite party preferred this appeal.

The brief facts as set out in the complaint are that the complainant purchased 1530 units from the opp.party at Rs.10/- per unit under Senior Citizens Unit Plan, 1993. A Membership Certificate dt.30.4.99 was issued and as per the Scheme the complainant and his spouse are eligible for medical treatment upto Rs.5 lakhs after completion of 54 years. In the meantime, the complainant received an intimation letter from opposite party requesting the complainant to opt for alternative Scheme in lieu of UTI SCUP 1993. But the complainant submits that he wanted to be retained in the Senior Citizen Unit Plan 1993 only and did not send his consent letter. Opposite party did not send the Identity Card cum Log Book even after completion of 55 years of age of the complainant. Thereafter the complainant misplaced the original certificate and requested the opp.party several times to issue duplicate certificate and even got issued a legal notice on 5.2.08 but did not receive any response. Hence the complaint seeking direction to the opp.party to provide benefits under Senior Citizens Unit Plan 1993 together with compensation of Rs.5 lakhs and costs.

Opposite party filed the written version stating that Unit Trust of India (UTI) was established as a statutory Corporation pursuant to Section 3 of the Unit Trust of India Act, 1963 (UTI Act). The preamble of UTI Act provided:

“An Act to provide for the establishment of a Corporation with a view to encouraging saving and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities.”

Pursuant to Section 19 titled “Business of Trust”, sub section(1) (8) © of UTI Act, the Board of Trustees of UTI (Board) was authorized to formulate plan or plans in relation to any unit scheme, under which a person acquired an interest in units.

Pursuant to Section 21 of UTI Act, the Board was authorized to formulate unit schemes for the purpose of providing facilities for participation in the income, profits, gains arising out of the acquisition, holding management or disposal of securities, interalia, covering various matters viz. issue of units and the face value of each unit, the form and manner of making the application etc.

The SCUP was formulated by the Board under Section 21 of the UTI Act and the Plan in relation to the SCUP under section 19(1) (8) © of the UTI Act. The SCUP was duly published in the Gazette of India on 28^th August 1993. SCUP was launched in 1993 as a socially oriented scheme catering to the needs of meeting the hospitalization costs upto Rs.2.5 lakhs/ 5 lakhs after attaining 58/61 years of age as mentioned in the SCUP. At the time of launch of the SCUP in the year 1993, since there was no medical security system in the country to protect individuals against hospitalization facilities; UTI launched SCUP with the objective to help individuals build up savings in order to enjoy medical and hospitalization benefits for their spouses and themselves when they become senior citizens. Under the SCUP, the investor was to invest a minimum amount required depending upon the age of entry. When he/she attained 55 years of age, premia was to be paid annually in seven consecutive installments to New India Assurances Co.Ltd. (NIAC) by UTI.

For the implementation of the scheme, UTI entered into a Memorandum of Understanding (MOU) with NIAC on 22^nd April, 1993, UTI, NIAC and designated hospitals also entered into Tripartite Agreement to provide hospitalization benefits to the members of the SCUP.

The SCUP was suspended for fresh sales of units by UTI with effect from 30^th June, 2000 due to the reasons mentioned hereinafter.

Pursuant to provisions of Unit Trust of India (Transfer of Undertaking and Repeal Act) 2002, (the Repeal Act) UTI has been restructured and the Schemes (and the plans issued there under) of UTI stood transferred to and vested in either the Administrator of the Specified Undertaking of the Unit Trust of India (SUUTI) or UTI Trustee Company Pvt. Ltd. the Trustee Company of UTI Mutual Fund, as provided under the Repeal Act.

The Schemes of the UTI were divided in two Schedules under the Repeal Act, Schedule I and Schedule II. The Schemes of UTI which were having an assurance about return and/or principal are part of Schedule I and vested in SUUTI. The other schemes of UTI are part of Schedule II and vested with UTI Trustee Company Pvt. Ltd., these schemes were to be managed as Securities and Exchange Board of India (SEBI) complaint Mutual Fund Schemes under the SEBI (Mutual Funds) Regulations, 1996 (SEBI MF Regulations).

SCUP forms part of Schedule II of the Repeal Act. However, SCUP, which provided certain medical insurance benefits, which were in turn based on certain assumptions about rate of return, premium to be paid for buying the insurance cover etc., was not fully consistent with the SEBI (MF) Regulations. The matter was taken up with Government of India and Government of India approved termination of the SCUP.

The amount collected under SCUP was managed as debt oriented scheme and there was a radical transformation in the economic scenario which led to the sharp decline in the interest rates and similar debt oriented schemes launched by UTI yielded returns of 12.2% as on 31.3.2008. Keeping in view the circumstances and the high premia payable to NIAC the SCUP was terminated after seeking all the required approvals. The proposed alternative offered by NIAC will cover the health insurance needs immediately irrespective of age profile whereas in SCUP the actual hospitalisation benefits commenced only after 58 years. The opposite party in their written version gave the following table to explain the benefits clearly. :

Age Category as on the date of termination of SCUP i.e. 18/2/2008	Status and benefits and other related aspects after SCUP termination
Below 58 Years	Unitholders who do not wish to opt for the alternate product of NIAC The outstanding Units of SCUP will be redeemed at the prevailing Net Asset Value as on February 18, 2008. Unitholders who wish to opt for the alternate product of NIAC The premia for the 1st year payable to NIAC will be paid from the repurchase proceeds calculated based on the NAV of the Scheme prevalent as on February 18, 2008 and the balance will be paid to the investor.
58 years and above but below 61 years	The future premia installments amount payable to NIAC, depending upon the age of the investor, will be deducted and paid top NIAC out of the repurchase proceeds of the outstanding units of the investor. The repurchase proceeds would be calculated as per the prevailing Net Asset Value as on February 18, 2008 and the balance, if any, after such payment to NIAC, will be paid to the Investor They will continue to get hospitalization insurance benefits of Rs.2.5 lacs pursuant to SCUP even after its termination.
61 years and above	The outstanding units, if any, will be repurchased at prevailing Net Asset Value as on February 18,2008 and paid to the Investor. They will continue to get hospitalization insurance benefits of Rs.5 lacs pursuant to UTI-SCUP even after its termination.

SCUP stood terminated w.e.f. 18.2.2008 and the entire unit capital of the unit holders accumulated under the SCUP was either offered to be return or invested in other schemes of UTI Mutual Fund. All mutual funds and securities investments are subject to market risks and the complainant is aware of terms and conditions of this investment and therefore the prayer of the complainant to continue with the SCUP Scheme does not arise and there is no deficiency in service on their behalf.

The District Forum based on the evidence adduced and pleadings put forward dismissed the complaint but gave the liberty to the complainant to exercise the option as offered in January 2008 within 30 days after receipt of the order.

Aggrieved by the said order, the opposite party preferred this appeal.

It is not in dispute that the complainant joined as a member of Senior Citizens Unit Plan (SCUP) in the year 1993 and purchased 1530 units as evidenced under Ex.A1 Membership Certificate. It is the complainants case that as per this scheme he will be provided with medi claim insurance along with his spouse once he attains the age of 54 years, but vide Ex.A6 letter dt.8.1.08 the Scheme was terminated and an alternate offer was made to the complainant to continue the medical insurance coverage with NIAC. But the complainant seeks direction to continue in the same scheme.

The learned counsel for the appellant/opp.party contended that UTI was established as statutory corporation pursuant to Section 3 UTI Act, 1963. The Board of Trustees of UTI was authorized to formulate Unit Schemes for the purpose of providing facilities for participation in income, profits etc. SCUP was formulated by the Board of Trustees under Section 21 of UTI Act and was formed as part of Schedule II of the Repeal Act of UTI Act 2002. The learned counsel for the appellant/opposite party drew our attention to the following benefits and related aspects after SCUP termination :

Age Category as on the date of termination of SCUP i.e. 18/2/2008	Status and benefits and other related aspects after SCUP termination
Below 58 Years	Unitholders who do not wish to opt for the alternate product of NIAC The outstanding Units of SCUP will be redeemed at the prevailing Net Asset Value as on February 18, 2008. Unitholders who wish to opt for the alternate product of NIAC The premia for the 1st year payable to NIAC will be paid from the repurchase proceeds calculated based on the NAV of the Scheme prevalent as on February 18, 2008 and the balance will be paid to the investor.
58 years and above but below 61 years	The future premia installments amount payable to NIAC, depending upon the age of the investor, will be deducted and paid top NIAC out of the repurchase proceeds of the outstanding units of the investor. The repurchase proceeds would be calculated as per the prevailing Net Asset Value as on February 18, 2008 and the balance, if any, after such payment to NIAC, will be paid to the Investor They will continue to get hospitalization insurance benefits of Rs.2.5 lacs pursuant to SCUP even after its termination.

We observe from the aforementioned status and benefits that the investors who have completed the age 58 years as on the date of termination of SCUP will continue to get hospitalisation insurance cover pursuant to SCUP  . Those investors who did not complete 58 years of age as on the date of termination of SCUP, NIAC offered an alternative plan. It is not in dispute that the investors are at liberty to exercise the option upto 4.2.08 and the complainant on his own volition did not choose to do so for reasons best known to him. The completion of the offer is dated 18.2.2008 and the complainant did not choose to exercise the option within that period. UTI was established as statutory corporation by Section 3 of UTI Act and the decision to terminate SCUP was done by the Board of Trustees under Section 21 of the UTI Act. Ex.B1 Gazette Notification of UTI Act vide Clause 9 shows that it has the inherent power to terminate SCUP and Clause 29 evidences that the Board was given power to make amendments to the Scheme and Clause 30 clearly specifies that it has power to terminate the Scheme. Therefore we see no substantial grounds to construe that there is any deficiency in service on behalf of the appellant/opp.party. The Dist. Forum while holding that there is no deficiency in service has given the complainant liberty to exercise option as offered in January, 2008. Keeping in view the submissions of the learned counsel for the appellant/opp.party that such a liberty to exercise the option cannot be offered now to the complainant as the offer period has been closed, we are of the considered opinion that based on equities and principles of natural justice the complainant is atleast entitled to refund of amount which he has invested in the SCUP Scheme as the amount has been lying with the opposite party since 30.4.99 (Ex.A1). The Lock-In period expires on 29.4.2000 (Ex.A1) and therefore we mould the relief prayed for by the complainant and direct the appellant/opp.party to refund Rs.15,300/- with interest at 9% p.a. from 18.2.08 till the date of realization. Keeping in view the circumstances of the case, we do not see it as a fit case to award any further compensation or costs.

In the result this appeal is allowed in part modifying the order of the Dist Forum and directing the opposite party to refund Rs.15,300/- with interest at 9% p.a. from 18.2.2008 till the date of realization. No costs.