UTI AMC, Jitesh Khosla, and Omita Paul

10/11/2011

The 
Hon’ble Prime Minister of India,

Govt of India,

South Block,

New Delhi

Act of Nepotism: Proposed Irregular and Illegal Appointment of Omita Paul’s brother as Chairman of UTI MF at over Rs 3 crore per annum salary.

Kindly refer to my complaints dated 30/5/2011 and 12/9/2011.

One of the issues mentioned in the complaint dated 30/5/11 related to the acts of nepotism of Ms Omita Paul, Adviser to the Finance Minister and Secretary in the Minister of Finance.

Ms Omita Paul’s husband was favoured by an unprecedented amendment in the IT Act.

The following exemption granted in the year 2011 was notified for being applied retrospectively from the year 2007-08 to cover the entire tenure of Mr Paul in the UPSC Section 10 (45) of the Income Tax Act stated:

(45) any allowance or perquisite, as may be notified by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission.

The other issue in the complaint on nepotism, related to the strenuous efforts being made by the Finance Ministry to ensure that the brother of Omita Paul, Jitesh Khosla, an IAS officer, be appointed as the Chairman of the UTI Asset Management Company.

What was not mentioned in the complaint was the fact that the emolument of Chairman of UTI AMC is over three crore per annum (information is not in public domain). This is more than 15 times than what the three highest constitutional authorities of the country get.

How the emoluments came to be over three crores is another story but suffice to mention that it was on account of clever and illegal manipulation by the erstwhile incumbent, U K Sinha, who was promoted to the post of SEBI chairman in a bizarre intervention by the same Mrs Paul, which is the subject matter of another complaint to be filed shortly. The fact is that not many know that the emoluments on offer is over three crores per annum and it will come as a surprise to the bureaucrats who may happen to read this complaint. For the record, Sinha earned over 10 crores in his four year stay at UTI MF. (Please refer to the balance sheet of the fund for the respective years)

The proposed appointment is a blatant act of nepotism and illegal for the following reasons:

  • Violates Article 14 of the Constitution.
  • Violates Article 16 of the Constitution.

The appointment is in gross violation of the crucial policy laid down by the government and endorsed by the JPC which went into the securities fraud of 2002. The last para of the report states:

Government has stated that a professional Chairman and Board of Trustees will manage UTI-II and that advertisements for appointment of professional managers will be issued. The Committee recommend that it should be ensured that the selection of the Chairman and professional managers of UTI-II should be done in a transparent manner, whether they are picked up from the public or private sector. If an official from the public sector is selected, in no case should deputation from the parent organisation be allowed and the person chosen should be asked to sever all connections with the previous employer. This is imperative because under no circumstance should there be a public perception that the mutual fund schemes of UTI-II are subject to guarantee by the Government and will be bailed out in case of losses.

The contents of the paragraph show that a specific commitment was made by the government and the same was endorsed by the JPC. The final recommendation was a key recommendation in the context of preventing future scams.

The accepted policy is being violated on three counts:

  • Mr Khosla is not a professional of the investment industry. In fact he is not even an amateur given his degree and zero experience of investment banking.
  • The post was not advertised
  • Mr Khosla does not propose to sever his connection with his previous employer but to join on deputation.

Other IAS officers and professionals in the field of investment  too should have been allowed to compete for the highest salary on offer by an institution controlled by the government through three public sector banks and LIC.

The obscene and undeserved salary approved through dubious and illegal means (the chairman of the Banks and LIC and the heads of the AMC of the mutual funds promoted by them get emoluments much less than 50 lakh per annum) should not be the monopoly of the brother of the secretary of the Finance Minister, whose appointment in turn as special advisor in itself is questionable, on account  of the personal recommendation of the concerned minister.

It needs to be mentioned that Mr Khosla was not even on the shortlist of the selection committee. The post of the chairman has been vacant since last ten months so that he alone may be selected for the post. During the period UTI has not been able to float any new scheme of mutual fund due to a SEBI rule that the AMC should have a permanent head.

One wonders as to what is the limit of manipulating salaries, of nepotism and of the arrogance of power. How many scams will it take for the corrupt to fear the law?

In this context, it may not be surprising that the honest hierarchy of officers at SEBI were removed to make way for the controversial Sinha so that Khosla could be appointed on emoluments over three crores!

I sincerely hope that the appointment will be halted by timely intervention so that it does not become a source of embarrassment to the government.

For the record the corpus with UTI AMC is around Rs 55,000 crores.

With sincere regards

Arun Kumar Agrawal

(Arun Agrawal is the author of the book Reliance: The Real Natwar. The opinions expressed by the author and those providing comments are theirs alone, and do not reflect the opinions of Canary Trap)

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