New Delhi -°C
Today in New Delhi, India

Dec 11, 2019-Wednesday
-°C

Humidity
-

Wind
-

Select city

Metro cities - Delhi, Mumbai, Chennai, Kolkata

Other cities - Noida, Gurgaon, Bengaluru, Hyderabad, Bhopal , Chandigarh , Dehradun, Indore, Jaipur, Lucknow, Patna, Ranchi

Wednesday, Dec 11, 2019

How the Uttar Pradesh PF case unfolded

During the interrogation, it was revealed that UPPCL authorities hired 14 brokerages to invest the provident fund (PF) in DHFL.

india Updated: Nov 12, 2019 06:27 IST
Rohit Singh and Brijendra Parashar
Rohit Singh and Brijendra Parashar
Hindustan Times, Lucknow
People protest against the alleged UPPCL irregularities in Lucknow on November 4.
People protest against the alleged UPPCL irregularities in Lucknow on November 4. (PTI File Photo)
         

The Uttar Pradesh Power Corporation Limited (UPPCL) saga continues with the former managing director and two high-ranking power officials interrogated by the UP police’s Economic Offence Wing (EOW) over their role in the investment of Rs 4,100 crore of the employees’ provident fund starting 2017, even as the Yogi Adityanath-led state government transferred Alok Kumar from his post as chairman of UPPCL on November 8.

The EOW began questioning AP Mishra, former employees trust secretary Praveen Kumar Gupta, and former director of finance Sudhanshu Dwivedi last Thursday over the investment in a Mumbai-based housing finance firm Dewan Housing Finance Corporation Limited (DHFL). The trio was sent back to judicial custody after their police remand ended over the weekend.

During the interrogation, it was revealed that UPPCL authorities hired 14 brokerages to invest the provident fund (PF) in DHFL. Further investigation has revealed the addresses of five out of 14 investment brokerage firms did not exist. Director general (DG) of the UP EOW, Rajendra Pal Singh, told HT that most of fake addresses were in districts of western UP, Uttarakhand and Delhi. The track record of 12 of these 14 firms revealed that they charged brokerage only for investment of UPPCL funds, he added. Addresses of seven firms were yet to be verified.

Starting March 2017, the Uttar Pradesh Power Sector Employees Trust, formed in 2006 to handle the state-run power company’s provident fund contributions, invested Rs 4,122.5 crore in multiple short-term fixed deposits. Till September, Rs 1,854.3 crore had been recovered on the maturation of FDs. This does not include the dividends that were paid as interest on the investments. However, Rs 2,268 crore remains with the private firm that came under the scanner of the Enforcement Directorate in October over its alleged ties to Iqbal Mirchi, Dawood Ibrahim’s aide.

On its part, the UPPCL internal auditors had verified the trust’s balance sheets up to the financial year 2016-17 and could not find any irregularities with regard to the investment in the DHFL, outgoing chairman Alok Kumar told the HT last week. The accounts for the financial year 2017-18 have not been audited yet.

DHFCL, a beleaguered firm

In August, DHFL had sought Rs 15,000 crore immediate funding from banks for on-lending to retail customers as well as to project developers, the Press Trust of India reported. In a separate filing to exchanges on August 8, the beleaguered home financier, which has defaulted on multiple times on payment to bondholders since June, said it may not be able to meet its financial obligations in the near future.

It has been facing liquidity issues since last September. The Wadhawans -- Kapil, its chairman and managing director, and Dheeraj, its non-executive director -- have been looking at various ways to come out of the stress which first came to light late last year following the crisis at IL&FS.

According to a press communiqué released on Friday (November 8), the company claimed that it had already made provisions for payment of fixed deposits maturing till December 2019. However, due to the Bombay high court order restraining the company from making payments to any of its secured/unsecured creditors, including fixed deposits, it has not released further payments. It stated that in case of the UPPCL deposits since 2017, nearly Rs 1,864 crore had already been repaid towards principal and an amount of Rs 208 crore paid as interest.

In October, the Bombay high court had noted that DHFL owed around Rs 74,000 crore to secured creditors and Rs 10,000 crore to unsecured creditors, and extended its previous stay on further payments by DHFL to its creditors, except payments made to secured creditors.

Waiting for their money

Having staged demonstrations at Shakti Bhawan in Lucknow in the past week, the state’s power employees have decided to organise rallies in various cities including Lucknow on November 14. “We will demand that the state government issue a notification giving us a guarantee that it would compensate for the loss of money if not recovered from the DHFL,” UP Karmchari Sanyukt Sangharsh Samiti convener Shailendra Dubey said.

Meanwhile, this issue has turned set off a political storm. On November 3, UP Power minister Shrikant Sharma stated in a press conference that the investment was made during the regime of the Samajwadi Party - when Akhilesh Yadav was CM. Calling for a probe by the Central Bureau of Investigation, Sharma said that the Centre’s guidelines allowed PF investment only in scheduled and listed financial institutions and DHFL, according to him, did not qualify as one.

“As soon the UP Power Corporation Ltd chairman received an anonymous complaint about irregularities, he immediately ordered a probe after which two officials were arrested too. I, on my part, took no time in writing a letter to the chief minister, suggesting a CBI probe as soon as I realised the gravity of the issue,” Sharma said.

A departmental enquiry instituted in July submitted its report the following month, which found financial irregularities in the investment. On October 1, a detailed investigation was ordered and PK Gupta, the trust’s secretary, was suspended.

The same day as Sharma’s presser, on November 3, former chief minister Akhilesh Yadav said in a press statement: “The UP Power Minister, who took Rs 20 crore donation from the Dewan Housing Finance Corporation Limited (DHFL), would [he] please tell what is his relationship with the company?” Two days later, the chief minister’s office tweeted, “The corrupt are crying foul as the CM strikes on corruption as per his zero-tolerance policy. The former MD of UPPCL who was the blue-eyed boy of Akhilesh Yadav and was accorded extension thrice has been arrested. So Akhilesh Yadav should state what his relation with him.” Yadav responded stating, “DHFL was not given a single penny during our regime if anyone is responsible for such a scam it the CM himself.”

Meanwhile, UP Congress leader Pradeep Mathur has called for the sacking of the power minister, stating that sums of investment could not have been transferred in the past three years without his knowledge.

However, as Dubey’s response indicates, the employees are clear that the responsibility must be borne by the government and not the loss-making UPPCL to return the money. The issue sees no sign of abating, and it is increasingly clear that the government will need to come up with a plan B to protect its employees’ interests.

Investigation underway

Even as the matter is under investigation, the EOW’s director general Rajendra Pal Singh has cast doubts over the timing of the investments.

On November 5, Rajendra Pal Singh, director general of the UP EOW, said the probe so far revealed that the UPPCL authorities accepted the quotation of DHFL on March 15, 2017 and approved it the following day. “On March 16, 2017, the DHFL quotation was cleared and the first instalment of around Rs 18 crore of the investment was transferred online to it on March 17, 2017,” he said. Six other companies including four nationalised banks — the State Bank of India, Bank of Baroda, Bank of India, and Vijaya Bank — as well as two private companies — PNB Housing and Housing and Urban Development — also sent quotations for investments. However, no investment was made in any of these companies. In December 2016, the trust had invested in PNB Housing.

According to Singh, former MD AP Mishra “forwarded his resignation to the state government on March 16 itself”. On March 24, the board comprising five men — besides Singh, Gupta and Dwivedi, who are in judicial custody, board members included senior IAS officer and then chairman Sanjay Agarwal and UPPCL director, personnel and administration Satya Prakash Pandey (he died a few months ago) — allegedly called a meeting to justify the investment.

The director general added that the EOW team detected overwriting in documents undersigned by Mishra and other board members, which indicated that the date of the meeting was reportedly changed to March 22. Mishra’s resignation had been accepted by the state government on March 23, 2017.