Bombay HC directs UTI AMC to include staff liabilities in IPO prospectus
The Bombay High Court has directed UTI Asset Management Company (AMC) to include the quantum of contingent liabilities arising due to pension and other dues related to its former and serving officers in its red herring prospectus before it hits the market for an initial public offering (IPO) of about Rs 3,000 crore.
In July, the UTI Retired and VSS Employees Social Association (UTIRAVESA) together with the Officers’ Association filed a writ petition before the Bombay High Court highlighting that the draft prospectus of the asset manager’s IPO failed to adequately highlight the contingent liabilities arising out of employee-related dues. The petition has now been withdrawn on assurance from the AMC that it will include the liabilities in the RHP.
The liabilities could amount to Rs 1,250 crore, with the bulk arising out of pension dues to 1,200-odd former employees, as per UTIRAVESA and the Officers’ Association’s estimates. UTI AMC, however, has maintained that the liabilities are not quantifiable at this stage.
A few months back, the central government filed an affidavit, saying it was not a party to the ongoing pension dispute of former UTI employees. This could put the onus on the AMC to pay the employee dues.
An email sent to UTI MF did not immediately get a response.
In January 2019, the ministry of finance, through the Department of Investment and Public Asset Management, had asked UTI AMC to address all pending grievances and ensure that the entitlements of officers of erstwhile UTI are protected under Section 6 (1) of the UTI Repeal Act 2002.
“The management of UTI AMC has delayed the implementation of the decisions of this critical report, to suppress the huge liability arising out of the settlement of long-pending issues and to camouflage and present a better financial statement before the IPO to prospective investors, which is unfair and misleading… the management and the board of UTI AMC are in a hurry to push the IPO at a high price, suppressing large liabilities,” a letter sent to Sebi by All India UTI AMC Officers’ Association a few months back had observed.
The information on employee related dues and liabilities has to be disclosed in the prospectus to ensure that investors do a fair evaluation of the IPO pricing, said a person who is part of the retired association. He added that payouts arising out of these liabilities could impact the AMC’s balance sheet.
According to Unit Trust of India Pension Regulations, 1994, pension will be payable to all full-time and part-time employees (exceeding 13 hours per week) who have completed 10 years of service.
UTIRAVESA had earlier filed two writ petitions before the Bombay High Court, demanding the opportunity to exercise options to avail of pension.
The Officers’ Association had also filed a writ petition in the Bombay High Court to restore the retirement age of officers to 60 years, in line with that of workmen staff and employees in the RBI/IDBI and public sector banks. Another writ petition was filed for restoration of sick leaves and other leave facilities.
The erstwhile UTI had offered a Voluntary Retirement Scheme in 2003 for employees completing 10 years of service. It had constituted a staff welfare fund which became part of Specified Undertaking of the Unit Trust of India, or Suuti, after the former split into two entities.
