2001 (4) TMI 827 - HC - Companies Law

UTI's Termination of Raj Lakshmi Unit Scheme-1992 Upheld, Court Emphasizes Limited Judicial Review

The High Court upheld UTI's decision to terminate the Raj Lakshmi Unit Scheme-1992, finding it within UTI's jurisdiction and compliant with natural ... UTI Board Issues Involved:1. Legality of terminating the Raj Lakshmi Unit Scheme-1992.2. Jurisdiction and authority of UTI to terminate the scheme.3. Compliance with principles of natural justice.4. Constitutional validity of Section 21(3) of the Unit Trust of India Act, 1963.5. Applicability of promissory estoppel against UTI.6. Procedural impropriety in the termination process.7. Justiciability of policy decisions made by UTI.Detailed Analysis:1. Legality of Terminating the Raj Lakshmi Unit Scheme-1992:The petitioners sought a writ of mandamus declaring the termination of the Raj Lakshmi Unit Scheme-1992 as illegal, arbitrary, and violative of principles of natural justice. They requested a direction for the respondents to continue the scheme. The UTI launched the scheme for the benefit of women, promising substantial returns over 20 years. However, the UTI decided to terminate the scheme effective from 1-10-2000, citing volatile market conditions and the need to safeguard the interests of the beneficiaries.2. Jurisdiction and Authority of UTI to Terminate the Scheme:The petitioners argued that the termination was ultra vires the scheme framed under Section 21 of the Unit Trust of India Act, 1963, and lacked jurisdiction. They contended that there was no provision in the scheme to cancel the investment and that the termination without prior notice to investors violated principles of natural justice. However, the court found that the scheme itself provided for premature termination under clause (xxvii), and the power to terminate was traceable to Section 21(3) of the Act. Thus, the action was within UTI's jurisdiction.3. Compliance with Principles of Natural Justice:The petitioners claimed that the termination violated principles of natural justice as it was done without prior notice. The court held that issuing individual notices to over 12 lakh investors was neither possible nor necessary. The scheme contained a termination clause, and there was no provision for prior notice. The court found no material to suggest that the petitioners could have raised any probable objections had a notice been issued.4. Constitutional Validity of Section 21(3) of the Unit Trust of India Act, 1963:The petitioners challenged the constitutional validity of Section 21(3), arguing that it conferred arbitrary and uncanalized power on the Board to amend the scheme. The court rejected this contention, stating that every discretionary power is not necessarily discriminatory, especially when the legislative policy is clear. The Board's power was structured and guided by the provisions of the Act, and the clause (xxvii) enabling premature termination did not suffer from any constitutional infirmity.5. Applicability of Promissory Estoppel Against UTI:The petitioners argued that UTI was estopped from terminating the scheme midway. The court noted that the decision was taken due to factors beyond UTI's control, such as market fluctuations and the advent of globalization. The investors were aware that all securities and investments carry market risk. The court found no foundation in the petitions to invoke the doctrine of promissory estoppel and rejected the contention.6. Procedural Impropriety in the Termination Process:The petitioners contended that the termination was procedurally improper as the scheme containing the termination clause was published after their investment. The court found this plea self-destructive, as the investments were made after the scheme was framed. The unit holders and UTI were bound by all the clauses in the scheme, including the termination clause. The court also rejected the contention that notice to the Central Government was required, clarifying that the notice was to the Government of Rajasthan.7. Justiciability of Policy Decisions Made by UTI:The court emphasized that policy decisions, especially those involving complex fiscal matters, are not ordinarily subject to judicial review. The decision to terminate the scheme was a policy decision taken by an expert body in the best interest of the investors. The court found no extraneous factors influencing the decision and held that judicial review is concerned with the decision-making process, not the merits of the decision itself. The court concluded that the impugned decision did not suffer from any legal infirmity and dismissed the writ petitions.Conclusion:The High Court dismissed the writ petitions, upholding the decision of UTI to terminate the Raj Lakshmi Unit Scheme-1992. The court found that the termination was within UTI's jurisdiction, complied with the principles of natural justice, and was a bona fide decision taken in the best interest of the investors. The constitutional validity of Section 21(3) was upheld, and the doctrine of promissory estoppel was found inapplicable. The court also rejected claims of procedural impropriety and emphasized the limited scope of judicial review in policy decisions.