INC FUND MANAGEMENT LTD. vs SHAKUNTALA BRIJ MOHAN

BOTH these revision petitions arose out of the same order dated 8.9.1999 passed by the State Commission, U.T. of Chandigarh in Appeal No. 91 of 1991. Brief facts of the case are : 1. All the three respondents invested a sum of Rs. 20,000/- in units of "Ind-Jyoti-7 year Incremental Growth Fund" in 1990 and were issued necessary certificates dated 1.12.1990. This scheme was formulated by Indian Bank Mutual Fund, a Trust registered under the Indian Trust Act. The revision petitioner in R.P. 2285/1999 is Ind Fund Management Ltd., a Company appointed as the Asset Management Company of the above Mutual Fund. The revision petitioner in R.P. 158/2000 is Indian Bank which is the principal Trustee of the Mutual Fund. Details regarding the "Ind-Jyoti" Scheme are given in Annexure-C which is the "offer document" of the Indian Bank Mutual Fund.

THE scheme has two options as far as return on investment is concerned. THE respondents are covered by option "Plan - B" which is a commulative option. Regarding this option, the offer document states "the value of the units will appreciate in tune with a minimum assured returns or at higher returns that may be declared. No dividend will be paid till redemption. However, certificates indicating the income accrued every year will be issued on request". (THE rates of "Assured minimum return" are given in para 14 of the offer document). Clause 6 is regarding duration of the scheme and it reads "the units will be redeemed on 31st March, 1998". Clause 15 provides for liquidity. This clause describes the re-purchase facility whereby the investors in units can sell them back at the Fund any time 1st April, 1995, at a price to be notified half-yearly. The complainants/respondents case is that, since the scheme was for 7 years and since their certificates were dated 1.12.1990, they waited for repayment of the capital invested along with capital appreciation till end of December, 1997. When they heard nothing from the Ind Fund Management Ltd., on 18th February, 1998, they approached the local branch of Indian Bank to enquire about the procedure for getting back their money. The Bank gave them a form - (Annexure-D) with the heading "Application for Repurchase of Ind-Jyoti Units". The respondents clearly told them that they are seeking redemption since the 7 years period has expired and that they are not seeking to resell the units to the Fund. The respondents questioned them as to why they are being given a "Repurchase Form".

It is further averred by the respondents that the local office of the Indian Bank told them that the same form can be used for redemption also and that they are aware that there is no question of repurchase involved since the duration of "Ind Jyoti" Scheme of seven years is over. However, the respondents were surprised when on the next day i.e. 19.2.1998, they received a cheque for Rs. 42,580/- only, whereas according to their calculations of the minimum assured return for Plan B of commulative option, they should have received Rs. 62,424/-. Their letters to the Fund were not satisfactorily answered. Having felt cheated by the Mutual Fund authorities, the respondents approached the District Forum.

ON the other hand, the Mutual Fund authorities argued that what the complainants asked for was for repurchase of the units by the Fund and not for redemption of the units which is possible only on 31.3.1998 and that they were correctly paid the repurchase value based on the then prevailing Net Asset Value of Rs. 21.19 per unit. The District Forum and later the State Commission in appeal held that there is no question of repurchase after the life of the scheme, which is seven years, that the intention of the complainants was to redeem their investments and that the Mutual Fund Authorities were trying to take advantage of mere technicalities and that there is a clear deficiency in service and ordered the Mutual Fund Authorities to pay the differential amount of Rs. 19,844/- with an interest of 18% and in addition to pay costs of Rs. 1,000/-.

BOTH the parties more or less repeated the same arguments before us, as advanced earlier. We have carefully gone through the records. While there is no doubt a mention in Clause 6 of the offer document "that the scheme should end on 31.3.1998", at many places the scheme is described as a 7 year scheme. The scheme commenced on 1.10.1990 and the respondents were given their Certificates on 1.12.1990. It is common sense that no one would ask for a repurchase by the Mutual Fund Authorities a late a date as on 18.2.1998. The respondents have obviously been misled into signing a "repurchase application". Further, the Fund Authorities were issuing every year, letters indicating the return earned on the units, on the last date of each financial year. They issued letters to the respondents saying that their investment is valued at Rs. 41,136/- on 31.3.1995 and at Rs. 47,202/- on 31.3.1996. Obviously, they cannot return a lesser amount of Rs. 42,580/- in February, 1998 when the respondents went to redeem their investment. We also noted that further the Fund Authorities have themselves admitted that the scheme did not do as well as expected, and that they could not pay the assured minimum returns and that their principal trustee, the Indian Bank had to come to the Funds'' rescue by giving a financial package to the Fund to honour its commitments. However, this financial assistance came only on 31.3.1998 and the Fund paid the full assured amount to those investors whose names were on their record on 31.3.1998. The argument of Fund Authorities is that the respondents had quit the scheme on 19.2.1998 by offering the units for "repurchase" by the Fund and hence are not entitled to receive the full assured minimum amount.

AS observed by us above, this is a very misleading and specious argument by the Fund Authorities to deprive the respondents from getting their due share. It is not believable that the respondents would offer his investments for repurchase by the Fund after having waited for 7 years and 2 months and just one month before the closure of the scheme. In any case, the Fund Authorities themselves misled the investors by saying repeatedly that it is a 7 year scheme and that the ''units shall be rendered after the expiry of 7 years from the date of allotment but not later than 31.3.1998''.

IN the circumstances as mentioned above, both the revision petitions fail. We affirm the order of the State Commission dated 8.9.1999. The revision petitioner would pay additional costs of Rs. 2,000/- to the respondents. Revision Petitions dismissed.