"Deep Rooted Conspiracy": Allahabad HC Denies Bail To UPPCL Director In Provident Fund Investment Scam Case [Read Order]

Stating that a "deep rooted conspiracy" appeared to be involved in the case, Justice Dinesh Kumar Singh refused to allow the bail application in the scam involving laundering of over 2,000 crore worth of employees' provident fund money.

Background

As per the facts available on record, Sudhansu Dwivedi, Director (Finance) of UPPCL was responsible for investing the provident fund amount that was deducted from the salaries of the member employees. It is alleged that in contravention of Government notification, Dwivedi invested more than 50% of the amount in term deposit of scam-hit Dewan Housing Finance Corporation Limited (DHFL).

It is pointed out that as per the notification issued by the Union Finance Ministry on March 2, 2015, moneys of the employees Provident Fund should not be invested in any of the institutions other than scheduled/unscheduled commercial banks. In this backdrop it is alleged that Dwivedi, with ill intentions, invested more than 50% of the amount in term deposit of DHFL, knowing well that it did not fall in the category of unscheduled commercial banks and it was an unsecured private institution.

It is further alleged that the decision to invest such a huge amount in a private institution was taken without taking the recommendation/cognizance of M.D./Chairman and rather, forged and fabricated minutes of the meeting of the Board of Trustees of the Contributory Provident Fund were prepared to show that the Board had agreed to consider investment proposals as per the government notification dated 2nd March, 2015 in the securities with higher security and high interest rates other than deposits of nationalised banks in AAA rated Companies.

Thus, the allegation in sum is that the accused in furtherance of criminal conspiracy with malafide intention for personal gain and in violation of the relevant provisions of law, invested huge amount of Employees Provident Fund in scam hit DHFL and that such malafide decision has caused huge loss.

Findings

The High Court noted that Dwivedi was the person who recommended for investment in the DHFL; investments were made without there being any authorisation of the Board of Trustees, but to justify the investment forged minutes of meeting were prepared on which signature of the Chairman were forged. Further, the accused was in receipt of a brokerage amount of Rs.5.69, given by DHFL for making investment for which the accused had not accounted properly.

In this backdrop the court remarked that there appeared to be a deep rooted conspiracy involved in the present case and it wasn't appropriate to release the accused on bail.

"The economic crime of such scale and magnitute are carefully and meticulously planned and executed. It is well settled that economic offences constitute a class apart and need to be visited with a different approach in the matter of bail. While granting bail, the court has to keep in mind the nature of accusations, magnitude and gravity of offence and nature of evidence in support of the accusations," the High Court held. Reliance was placed on Supreme Court's ruling in YS Jagan Mohan Reddy v. CBI, (2013) 7 SCC 439.

The court further observed,

"The present case involves a scam of huge magnitude involving money of 42000 employees of the Three Electricity Corporations who had invested it with a hope that they would get good return on it at the time they would need money. Trust has been breached in criminal conspiracy by the accused which has resulted huge loss to the two Trusts resultantly to the employees. The accused is an influential person. The money trail is yet to be completely discovered and, therefore, at this stage, the accused-applicant cannot be released on bail.

The accused has received huge brokerage amount of Rs.5.69 crores in his account from DHFL directly for which he has not accounted properly and satisfactorily. This is a documentary evidence. He has not been able to show anything for having any connection with DHFL or having any business relation with DHFL…

Whether the accused had knowledge of the above mentioned transactions with the DHFL or the Chartered Accountant had kept him in dark, is a matter of Investigation and evidence."

The high court also rejected the bail plea moved by another Trustee, roped in as a co-accused in the case.

In his defence Dwivedi had submitted that making investments in AAA rated Housing Finance Companies was a joint decision of the Board of Trustees since term deposits with the banks were not yielding much profits after demonetization, and his role thereof was only to the extent of recommending on the financial health and viability of the DHFL.

He had also argued that the notification of the Government of India dated March 2, 2015 was not applicable on UPPCL's Trusts as they are not registered with the EPFO which regulates the Provident Funds.

The Bombay High Court has restrained DHFL from making any payments to any of its other creditors, in view of a pending dispute with Reliance Nippon Asset Management Limited.

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