UP cooperative bank employees' PF trust invested Rs 21 cr in scam hit DHFL

Adityanath government to take legal action, including filing for claims with liquidator

After Uttar Pradesh power employees' provident fund (PF) trusts were exposed for illegally investing Rs 4,122 crore in Dewan Housing Finance Corporation Limited (DHFL), another trust managing the provident fund of a state cooperative bank has been found to have parked Rs 21 crore in the scam hit private mortgage lender.

UP cooperative land development bank employees' PF trust invested Rs 21 crore in DHFL during 2016 and 2017, and the entire corpus is outstanding. The investment was made when the company enjoyed good investment ratings.

Given the precarious financial position of DHFL and the Bombay High Court's ban on the company from making fresh payments, the UP cooperative department is preparing to take legal action, including filing for claims with the liquidator/administrator appointed for the beleaguered non-banking financial company (NBFC) to secure the PF investment.

UP co-operative principal secretary M V S Rami Reddy told Business Standard the land development bank currently had total corpus of Rs 293 crore, of which Rs 21 crore stood invested with DHFL.

“Following this development, we had inquired from all the state co-operative entities regarding any outstanding investment in DHLF or other private institutions. However, no other cooperative body has so far been found to have such risky investments,” he said.

Reddy further said the government was actively working towards creating such a framework under which the PF would be managed through the EPF commissioner to pre-empt any prospective financial risk.

“At present, the PF trusts are generally managed by the employees, who lack the financial expertise to track the progress of the corpus on a regular basis and to take corrective actions, whenever needed. Now, we want these PF investments to be managed under the aegis of the EPF commissioner, so that it is both safe and managed professionally,” he underlined.

Recently, the economic offenses wing (EOW) of UP Police arrested 7 accused in the UP Power Corporation Limited (UPPCL) employees PF scam. The arrested included a senior DHFL official, a chartered accountant (CA) and the owners of bogus brokerage firms. With these arrests, the number of those rounded up in the case has risen to 12.

Earlier, then UPPCL managing director A P Mishra and two suspended Corporation officials were among the five accused arrested in the case.

While Rs 4,122 crore were invested in DHFL as unsecured term deposits by the two trusts managing the PF of power employees between March 2017 and December 2018, about Rs 2,267 crore are still to be repaid by the company.

Last month, the Adityanath government had undertaken to ensure the payment of the outstanding amount with DHFL if it failed to repay. The state had recommended a CBI probe, however, the central agency is yet to take over the case.