Bajaj Auto moves Bombay High Court against UTI

Bajaj Auto today moved the Bombay High Court to restrain UTI from winding up the Bonus Plan. This is the first time an Indian company has dragged the mutual fund giant to the courts.

The petition also challenges SEBI's circular on closure of schemes wherein any mutual fund scheme should have a minimum of 20 investors and no single investor should hold more than 25 per cent of the corpus of the scheme, failing which the scheme should be wound up. The scheme had to be automatically wound up since it did not conform to this rule.

Bajaj Auto has contended that winding up the bonus plan before the end of the first year exposes the unit holders to additional tax and interest, and, therefore, defeats the entire purpose of investing in the plan.

The two-wheeler company had invested around Rs80 crore in the scheme, accounting for 60 per cent of the scheme's portfolio. The company could have availed of tax exemption if it had stayed invested for a year under the new capital gains tax rules.

Apart from Bajaj Auto, two other investors from Jaipur and Pune have also petitioned the Bombay High Court against the closure of this plan.

Over 1,100 investors of UTI's Bonus Plan scheme run the risk of their tax planning going askew with the closure of the Bonus Plan, which by its very nature, as investors are aware, is structured to be used as a tax planning strategy.