The Regional Provident Fund Commissioner (RPFC) office is issuing show-cause notices to the trustees and employers of 25 exempted provident fund (EPF) establishments in Maharashtra following detection of holes in their investment portfolios.
These funds have failed to procure securities for which they had already paid the brokers, said RPFC senior officials.
Following the irregularities in the investment by trust funds, a number of companies have fallen under the scrutiny of the RPFC. The list includes Knoll Pharmaceuticals, Mafatlal Dyes & Chemicals, Lawrence & Mayo and Wilco Ship Management & Travel Pvt Ltd, in Maharashtra.
This follows a special audit ordered by the Central Provident Fund Commissioner's Office on the differences between the actual custody of securities and the amount advanced for their purchase.
Giltedge Securities, which was involved the Rs 100 crore Seamen's provident fund scandal, is involved in some of the exempted funds too.
According to highly placed sources, the special audit revealed that Giltedge had been paid Rs 94 lakh by Wilco Ship's trust fund in November 2001 for purchasing securities. These securities were never purchased and the trust was able to only recover Rs 30 lakh.
In a similar instance, the Knoll Pharmaceuticals trust fund is found to have parted with Rs 1.74 crore for purchasing securities through the Harish Chandra Butt broking house for which no physical delivery has been received as yet.
The special audit was ordered by the Central Provident Fund Commissioner to verify whether the government securities purchased by the exempted establishments through broking agencies were in their physical custody in May 2002.
After auditing 471 establishments in Maharashtra, discrepancies have been found in the balance sheet of 23 other trust funds where the amounts invested in securities were not in keeping with the physical delivery shown. Home Trade has also figured among the broking agencies contracted by the trust funds as shown in the audit.
"We are suspicious of these transactions. However, unlike in the case of the Seamen's provident fund, the amounts if siphoned off by broking agencies from the trust funds are recoverable from the companies running the trusts," said RPFC sources.
The report also revealed that there were instances where "some establishments were found to have purchased the securities in the name of the establishment and not the board of trustees as is required".
The bi-partite board of trustees includes representatives from the employees and employers. By keeping the securities in the name of the establishment, this could result in manipulation, officials said.
Further, it was found that some of these trust funds were not maintaining the pattern of investments. The norms prescribe that 25 per cent has to be invested in government securities, 15 per cent in state government paper which has government guarantee, 40 per cent in bonds issued by financial institutions or public sector banks, and 20 per cent in either of the three.
Investment norms that were laid down in 1998, were revisited once to allow provident funds to invest 10 per cent of their corpus in corporate bonds. This is provided that the corporate paper has been rated by two agencies and given a double-A rating.
