POLITICS & PUBLIC AFFAIRS: Murkier beneath the surface
PF trusts allegedly bent rules to invest ~4,122 crore in crisis-hit DHFL; parked 99% of corpus in 3 NBFCS IIUP PROVIDENT FUND SCAMII
PF trusts allegedly bent rules to invest ~4,122 crore in crisis-hit DHFL; parked 99% of corpus in three NBFCS. VIRENDRA SINGH RAWAT writes
The arrest of five people, including three serving and retired Uttar Pradesh Power Corporation (UPPCL) officials, in connection with alleged irregularities in parking the state electricity body’s employee provident fund (PF) notwithstanding, the saga is only getting murkier by the day.
While investments by the UP State Sector Employees Power Employees’ Trust and the Provident Fund Trust in Dewan Housing Finance Corporation (DHFL) are worth ~4,122 crore, part of that money — ~1,855 crore — was repaid, leaving ~2,267 crore to be recovered.
While the alleged unauthorised investments were made in instalments from March 2017 till now, unsecured term deposits were parked with two other nonbanking financial companies (NBFCS) — PNB Housing Finance and LIC Housing Finance.
Given that the DHFL deposit alone accounted for 65 per cent of the investment by the two trusts, the net corpus of the trusts is calculated to be approximately ~6,300 crore. The trusts invested 99 per cent of their corpus in these three NBFCS.
With trust officials keeping mum and the investigative agencies sealing their offices and confiscating records, more such investments by bending rules in the past cannot be ruled out. In fact, the two trusts have not held mandatory meetings every three months for the past several years.
Recently, DHFL, in a statement, claimed that the Bombay High Court had passed an order restraining the company from repaying any of its secured/unsecured creditors, including fixed deposits.
While investigators are still investigating commissions or kickbacks in the alleged scam, those arrested are being subjected to intense interrogation. This is perhaps the first major instance when the Yogi Adityanath government is fighting corruption charges.
DHFL is being probed by the Enforcement Directorate (ED) in connection with money laundering rackets of fugitive gangster Iqbal Memon, alias Iqbal Mirchi, besides other irregularities.
So far, former UPPCL managing director A P Mishra — in whose tenure’s fag-end, the suspected “unauthorised” investments in DHFL began in March 2017 and continued until December last year — has been arrested. The other arrested individuals include two suspended employees of the power utility — the UPPCL general manager and the trusts’ secretary, Praveen Kumar Gupta, and UPPCL Director (Finance) Sudhanshu Dwivedi.
Besides, Gupta’s son Abhinav and his aide Ashish Chaudhary, the owner of a suspected bogus brokerage firm, were rounded up.
Only when Principal Secretary (Power) and UPPCL Chairman Alok Kumar and Power Secretary and UPPCL Managing Director Aparna U were removed did the episode begin to make headlines.
Energy Minister Shrikant Sharma, who is on the radar of the Opposition, had com
plained to the chief minister against Alok Kumar that he allowed “unauthorised” investments to take place and not apprised him of the case.
On July 10 this year, UPPCL received a complaint alleging fraudulent investments in DHFL, following which Alok Kumar set up an investigation committee on July 12. Its report on the matter was submitted on
August 29.
However, it was after the matter became public that the government ordered the arrest of Gupta and Dwivedi; a police case was filed on November 2. A CBI probe was recommended and the case handed over to the UP police’s economic offences wing (EOW) until the central agency took over the investigation.
According to the FIR, on May 8, 2013, the trustees adopted a resolution to invest in term deposit schemes for public sector banks. At another meeting on April 21, 2014, the trustees decided to explore other investment avenues offering higher returns. In October 2016, the trusts invested in the term deposits of nationalised banks.
In December 2016, the two trusts invested in PNB Housing’s term deposit scheme. While Gupta proposed the investment route, Dwivedi and Mishra allowed the proposal.
However, in March 2017, when the government transition was taking place in the state after the Bharatiya Janata Party emerged victorious in the Assembly polls, the trusts allegedly started investing in DHFL without the approval of the UPPCL chairman/md.
The trusts’ meeting on March 24, 2017, passed a resolution that “the board of trustee agreed to consider the investment proposals as per government notification dated March 2, 2015, in the securities with higher security and high interest rates other than deposits of nationalised banks Triple A-rated companies as per prevailing practice further investment in securities will be decided by secretary (trust) on a case-tocase basis with the consent/approval of director (finance) UPPCL trustee”.
On condition of anonymity, a former chairman of UPPCL said if decisions on investing PF funds had been made and the investments continued for almost two years, the chairman of the Corporation, who is also ex-officio chairman of the two trusts, could not claim immunity for acts of omission or commission.
Meanwhile, the power utility’s employees have declared a 48-hour boycott of work on November 18-19. They are demanding the arrest of Alok Kumar since more than ~4,000 crore worth of investments in DHFL took place under his nose.
The convener of the UP power employees’ joint action committee, Shailendra Dubey, demanded that the Yogi Adityanath government issue a gazette notification undertaking for repaying PF money to nearly 45,000 employees.