Financial Daily from THE HINDU group of publications
Monday, May 13, 2002
Money & Banking - Govt Bonds
Industry & Economy - Economic Offences
`CAG audit failed to detect misuse of seamen fund'
NEW DELHI, May 12
THE annual audit of the accounts of the Seamen's Provident Fund (SPF) by the Comptroller and Auditor-General (CAG) of India had failed to detect the lack of possession of securities against which investments were made out of the fund.
"This glaring failure on the part of CAG to verify whether securities were available or not for investing funds worth Rs 92 crore and re-investing the interest accrued on such investments has shown the CAG in poor light," officials in the Mumbai-headquartered SPF Organisation tracking the gilts scam surrounding the SPF have alleged.
While booking the accrued income on the books of the SPF, the auditors also failed to verify whether the interest on investments had actually been received by the SPF or not.
Significantly, the CAG reports on SPF accounts are placed in Parliament annually.
The genesis of the scam is also traced to a resolution adopted by the board of trustees on December 17, 1996 empowering the Commissioner of the SPF Organisation to take over the work of investment of SPF monies, which was hitherto done by the board of trustees.
"Even this resolution empowering the Commissioner to take over the work relating to the investment of monies accruing to SPF was illegal in terms of the The Seamen's Provident Fund Commission Act, 1966," the officials pointed out.
Incidentally, the resolution was adopted when Mr M.P. Pinto, the current Secretary, Ministry of Shipping, was the Chairman of the board of trustees of SPF in his capacity as the then Director-General (Shipping).
"The Commissioner, Mr A.K. Gond, has allegedly misused the resolution and hood-winked the board of trustees," the officials said.
While the resolution adopted on December 17, 1996 empowered the Commissioner to look after the investment work relating to just 8 per cent of the total corpus of SPF in securities mentioned by the board as per Central Government, Mr Gond had gone much beyond his brief, the official alleged.
About 92 per cent of the SPF monies are invested in Special Deposit Schemes (SDS) of the Government. "There is no documentary evidence to show that the investments were made in authorised securities. All dealings with the broker were carried out over the telephone for which payments were issued by cheque for making investments," the officials disclosed.
Stating that it would be a difficult task to recover the money that had vanished, the officials, however, discounted the possibility of a run on the SPF corpus in the wake of the fraud. "The Seamen (ratings) are paid the provident fund money only on superannuation. So, there is no immediate fear of a run on the funds," the officials said.
Though the board of trustees of the SPF, at a meeting held on May 10, had decided to relieve Mr Gond of his duties, no disciplinary action has so far been taken against him.
The officials also questioned the decision of the current Chairman of the SPF board of trustees, Mr D.T. Joseph, Director-General (Shipping), on filing an FIR with the Central Bureau of Investigation without consulting the Ministry of Shipping. "An attempt is being made to brush the case under the carpet," they noted.
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