HC orders UP to return PF

The Delhi High Court has ordered the state of Uttar Pradesh to return the collected provident fund (PF) to Modern Food Industries (India) Ltd (MFIL) within 60 days from its date of investment.

It also directed the state to make recoveries from the UP Cooperative Spinning Mills Federation Ltd for the PF amounts invested by it under its sovereign functions.

The judge said that there was little likelihood of the workmen's PF amount being "liquidated by the principal debtor (UP Cooperative Spinning) and therefore, it would be appropriate to order recovery from the guarantor of the state."

While admitting the sovereign guarantee extended by the state, Justice Vikramajit Sen said that MFIL was entitled to receive the principle sum of Rs 15 lakh along with interest at 14.9 per cent rate from the date of investment within 60 days.

"It is not sanguine to submit that had this sovereign guarantee not been extended, the provident funds of the workmen would not have been invested by the trustees with the UP Cooperative Spinning Mills."

According to the court, the state should be fully empowered to make recoveries from UP Cooperative Spinning Mills Federation for the amounts paid by it to MFIL.

The state had extended its sovereign guarantee to the bonds issued in favour of investors (MFIL). MFIL-Contributory Provident Fund Trust (MFIL-CPFT) had invested Rs 15 lakh from its collections/receipt of PF from its workmen in UP Cooperative Spinning Mills Federation Ltd.

However, MFIL had not received any payment either towards interest or principle investment after December 1999 from the UP Cooperative Spinning Mills Federation on the ground that its debts were twice as much as its assets.