IQBAL CHAND ARORA Vs. UNIT TRUST OF INDIA

JUDGEMENT

(1.) The appellant had invested a sum of Rs.2,00,000/- with the respondent-UTI. The plan was stated to be in response to the persistent demand from investors particularly retired persons for either Monthly Income or Cumulative option for a period of five years with the option of repurchases on the basis of NAV (Net Asset Value) after one year. As per the scheme, at least 80% of the funds under the plan were to be invested in fixed income securities while 20% was to be invested in equities and equity related documents. After one year he was paid Rs.1,83,000/- against the invested amount of Rs.2,00,000/- on the basis of prevailing NAV.

(2.) Feeling aggrieved, the appellant filed the complaint before the District Forum seeking recovery of the remaining amount of Rs.17,000/- with interest. The claim of the appellant did not find favour with the District Forum solely for the reason that risk factor is provided in the application form itself and, therefore, it was duty of the complainant that he should have gone through the application form before applying for the scheme in question and further the appellant was aware that an option of re-purchase was to be based on NAV of the unit price of the scheme. It is pertinent to note here that the District Forum in the same breath observed that the respondent-UTI being the Government undertaking was entitled to complete with the financial institutions should not hold out promises or assurance that at the first sight appear very lucrative and attractive.

(3.) Admittedly in the instant case, respondent/uti promised assured income @ 12% p. a. to the investors and even issued post-dated monthly dividend warrants to the investors for the first year. As is apparent from the impugned decision, it has been based upon the terms and conditions printed on the application form. The said conditions form are as under : HIGHLIGHTS 1. A five year plan.2. Open to resident adult individuals/mentally handicapped persons/minors/hufs/trusts/bodiesoporora-te/ Regd. Societies/non-profit making companies (under Sec.25 of Companies Act, 1956 excluding Banks and other companies.3. Plan offers regular monthly income. For the first year dividend shall be paid @ 12% per annum. Dividend for the subsequent years will be declared at the end of the preceding years and paid monthly.4. Post-dated monthly dividend warrants will be given for one year in advance.5. There is also an option to cumulate returns instead of monthly dividend.6. Repurchase allowed after the first year at NAV based repurchase price.7. Scope for capital appreciation as the units will be repurchased at NAV based repurchase price.8. No tax deduction at source for individual investors.9. Tax benefits under Sec.80l on dividends and under Sections 48 and 112 on capital gains from capital appreciation.10. Cost efficiency of UTI has been of high order e. g. the initial issue expenses for MIP 94 and MIP 94 (11) were 1.67% and 1.74% respectively of the funds mobilised under those plans. RISK FACTORS 1. Investments in units of this plan are subject to market risks and the NAV of the plan may go up or down depending on market forces.2. Performance of the previous Schemes/plans of UTI is not necessarily an indication of future results. There can be no assurance that the objective of the Plan will be achieved.3. Monthly Income Plan is only the name of the Plan and does not in any manner indicate the quality of the plan. Investors are urged to study the terms of the offer carefully before they invest in the plan. Management's perception of Risk Factors 4. UTI has been in operation for over 30 years and has built up expertise in managing funds of around Rs.54,000 crores from over 37 million investors and the track record of performance of the funds including previous Monthly Income Schemes/plans has been reasonably good.