# Sudhanshu Dwivedi v. State of U.P

- **Citation:** Bail No. 12506 of 2019
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-08-22
- **Case number:** Bail No. 12506 of 2019
- **Bench:** Dinesh Kumar Singh
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sudhanshu-dwivedi-v-state-of-u-p-46326
- **Pages:** 24

## Headnote

A. Criminal Law- Prevention of Corruption
Act,1988-Section 13(2)-Code of Criminal
Procedure,1973-Sections 439 & Indian
Penal Code,1860-Sections 409, 420, 467,
468, 471, 120B & application-rejectionapplicants received brokerage amount
from
DHFL
directly
into
their
bank
account-they failed to disclose as to how
and why they have received amount into
their account-trial court rightly rejected
the bail of the accused person.

B. The instant case involves a scam of
huge
magnitude
involving
money
of
42000 employees of the three Electricity
Corporations who have invested it with a
hope they would get good return. Trust of
employees
has
been
breached
by
conspiracy
of
the
accused.economic
offences constitute a class apart and need
to be visited with a different approach in
the matter of bail.

C. While granting bail, the court has to
keep in mind the nature of accusations,
evidence,
the
severity
of
the
punishment,character
and
circumastances, reasonable possibility of
securing the presence fo accused at trial,
reasonable apprehension of the witnesses
being tampered with, the larger interests
of the public/state and other similar
considerations.

The
accused
in
furtherance
of
criminal
conspiracy with malafide intention for personal
gain and in violation of the relavant provisions
of law, invested huge amount of two funds.
Their malafide decision caused huge loss to
these funds to the amount of Rs. 2267.9 crores
besides interest.

The application is rejected. (E-6)

List of Cases Cited:-

## Text

_Characters 0–39,706 of 62,344. This is a partial read: ask again with offset=39706 for what follows._

1348 INDIAN LAW REPORTS ALLAHABAD SERIES
of Corporate Affairs to investigate the
affairs of another Company, i.e., F.I.L. and
Ministry of Corporate Affairs vide order
dated 22.8.2019 granted the said approval.
There is also a criminal antecedent of the
applicant which has been registered by the
C.B.I. at the instance of Bank of Baroda in
which the C.B.I. has submitted chargesheet against the applicant and his father
Vikram Kothari and is pending trial before
the Special Judge, Anti Corruption, CBI
Court at Lucknow.

16. Thus, taking into account the
nature and gravity of the offence which
shakes the conscience of the society and
public at large, investigation being still
pending and there are strong apprehension
that there would be chances of tampering of
evidence by the applicant, the prayer of the
applicant for grant of immediate release till
such time that pandemic COVID-19
(Corona Virus) is curtailed, is hereby
refused.

17. Accordingly, the prayer made in
the present bail application for immediate
release on bail till such time that pandemic
COVID-19 (Corona Virus) is curtailed to
the applicant, namely, Rahul Kothari
pertaining to the Order dated 21.02.2018
issued by respondent no. 2 in furtherance of
Order No. 03/117/2018-CL-II (NR) dated
21.02.2018 and Order No. 7/117/2108/CLII (NR) dated 22.08.2019 under sections
447 read with 36 (c) and 448 of the
Companies Act, 2013, is hereby rejected.

18. However, it is directed that the
I.G. (Prison) State of U.P. Lucknow is
directed to ensure that the applicant is kept
safely in District Jail, Kanpur Nagar where
he is stated to be confined as on date taking
all necessary precautions as has been issued
by the State of U.P. in the context of
Corona Virus (COVID-19) particularly, if
any, also with respect to prisoners detained
in jail throughout the State.

19. It is further directed that the
respondent shall expedite the investigation
of the present case and conclude the same
at the earliest.

20. It is made clear that any
observation made by this Court would not
prejudice the right of the applicant for
consideration of his regular bail application
under section 439 Cr.P.C., if any, filed
before this Court or the Court below, as the
case may be, as the same has been made
only for the disposal of the present bail
application.

21. Copy of this order shall be
produced by the counsel for the applicants
before I.G. (Prison) State of U.P. Lucknow
for necessary information and follow up
action. The learned Assistant Solicitor
General shall also forward a copy of this
order to the I.G. (Prison) State of U.P.
Lucknow for its immediate follow up and
compliance, forthwith.
----------
(2020)03-05ILR A1348
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 07.04.2020

BEFORE

THE HON'BLE DINESH KUMAR SINGH, J.

Bail No. 12506 of 2019
&
Bail No. 873 of 2020

Sudhanshu Dwivedi ...Appellant
Versus
State of U.P. ...Opposite Party

Counsel
for
the
Appellant:
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1349
Brij Mohan Sahai, Pankaj Yadav, Saurabh
Shankar Srivastav, Syed Mehfuzur Rehman

Counsel for the Opposite Party:
G.A.

A. Criminal Law- Prevention of Corruption
Act,1988-Section 13(2)-Code of Criminal
Procedure,1973-Sections 439 & Indian
Penal Code,1860-Sections 409, 420, 467,
468, 471, 120B & application-rejectionapplicants received brokerage amount
from
DHFL
directly
into
their
bank
account-they failed to disclose as to how
and why they have received amount into
their account-trial court rightly rejected
the bail of the accused person.

B. The instant case involves a scam of
huge
magnitude
involving
money
of
42000 employees of the three Electricity
Corporations who have invested it with a
hope they would get good return. Trust of
employees
has
been
breached
by
conspiracy
of
the
accused.economic
offences constitute a class apart and need
to be visited with a different approach in
the matter of bail.

C. While granting bail, the court has to
keep in mind the nature of accusations,
evidence,
the
severity
of
the
punishment,character
and
circumastances, reasonable possibility of
securing the presence fo accused at trial,
reasonable apprehension of the witnesses
being tampered with, the larger interests
of the public/state and other similar
considerations.

The
accused
in
furtherance
of
criminal
conspiracy with malafide intention for personal
gain and in violation of the relavant provisions
of law, invested huge amount of two funds.
Their malafide decision caused huge loss to
these funds to the amount of Rs. 2267.9 crores
besides interest.

The application is rejected. (E-6)

List of Cases Cited:-

1. Y.S. Jagan Mohan Reddy Vs. CBI (2013) 7
SCC 439

2. St. Of Bih. Vs. Amit Kumar (2017) 13 SCC
751

3. Rohit Tandon Vs. ED (2018) 11 SCC 46

4. S.F.I.O. Vs. Nitin Johari & anr. (2019) 9 SCC 165
(Delivered by Hon'ble Dinesh Kumar
Singh, J.)

1. The present applications under
Section 439 Cr.P.C. have been filed
seeking bail in FIR No.540 of 2019
inititially registered under Sections 409,
420, 467, 468, 471, 120B IPC. Section
13(2) of the Prevention of Corruption Act
has been added subsequently during the
course of investigation.

2. On 2nd November, 2019, the
aforesaid FIR came to be registered on the
complaint of one I.M. Kaushal, Secretary,
Trustof Uttar Pradesh Power Corporation
Limited
(hereinafter
referred
to
as
"U.P.P.C.L.") against one Mr. Praveen
Kumar Gupta, ex-Secretary (Trust) and Mr.
Sudhanshu Dwivedi, the accused-applicant
in Bail No.12506 of 2019 who served
U.P.P.C.L. in the capacity of Director
(Finance) from June 2016 to June 2019.

3. As per the FIR, in pursuance of the
implimentation
of
the
Uttar
Pradesh
ElectricityReforms Transfer Scheme, 2000,
the Uttar Pradesh State Electricity Board
was divided on 14th January, 2000 into 3
Companies i.e. (i)Uttar Pradesh Power
Corporation Limited, (ii) Uttar Pradesh
Rajya Vidut Utpadan Nigam Limited, and
(iii)
Uttar
Pradesh
Hydro
Power
Corporation Limited. On 14th January,
2000 itself the employees working in the
Uttar Pradesh State Electricity Board were
1350 INDIAN LAW REPORTS ALLAHABAD SERIES
assigned to the aforesaid three corporations
established in pursuance of the Reform
Scheme. In respect of all the employees
working in these three power corporations,
Uttar
Pradesh
State
Power
Sector
Employees Trust was constituted on 29th
April, 2000 under the provisions of the
Provident Fund Act, 1952 to manage
general provident fund, gratuity fund and
pension fund of the employees of three
electricity corporaions so consituted.

4. A Trust-deed was executed on 24th
April, 2000 for creation of the Trust. As per
trust deed, the aforesaid three funds
namely, General Provident Fund, Gratuity
Fund and Pension Fund created for the
benefit of employees of three power
corporations shall be called "Uttar Pradesh
State Power Sector Employees General
Provident Fund", "Uttar Pradesh State
Power Sector Employees Gratuity Fund"
and "Uttar Pradesh State Power Sector
Employees Pension Fund". These funds
collectively would be referred to as
''Funds'.

5. As per the Trust-deed, the funds
vest in Board of Trustees who shall
administer the Funds in accordance with
the Rules as set out in the Schedule of the
Trust-deed. The First Trustees are:

(i)''Chairman
cum
Managing
Director, U.P.P.C.L.' Chairman of the Trust;

(ii)
''Chairman
cum
Managing
Director of U.P.R.V.U.N.L.' Member; and

(iii) ''Chairman cum Managing
Director, U.P. Hydro Power Corporation Ltd.',
Member.

6. The other Trustees are to hold office on
appointment by nomination or otherwise, in the
manner as provided in the Uttar Pradesh State
Power Sector Employees General Provident
Fund Rules, 2000.

7. Clause 7 of the Trust-deed reads as
under:-

"7. That the trustees of the Board
shall hold the ''Funds' and the amounts accruing
in Trust for the Members and beneficiaries of
the said ''Funds' and shall administer and apply
the same in accordance with these presents and
the Rules, nevertheless subject to the Provisions
of the Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 and the
Schemes framed thereunder, and the Income
Tax Act, 1961 and the Income Tax Rules,
1962."

8. For the management of provident
fund
of
the
employees
joining
the
U.P.P.C.L. on 14.01.2000 or later, Uttar
Pradesh Power Corporation Contributory
Provident Fund Rules, 2004 were enacted
and made applicable with effect from 1st
April,
2004.
Uttar
Pradesh
Power
Corporation Contributory Provident Trust
(hereinafter referred to as "CPF") was
constituted on 25th June, 2006 under the
Provident Fund Act, 1952.

9. Appropriation and the management
of Provident Funds of the employees of the
Uttar
Pradesh
State
Power
Sector
Employees Trust and the Uttar Pradesh
Corporation
C.P.F.
Trust
was
the
responsibility of Secretary (Trust) and
Director
(Finance)
U.P.P.C.L.
The
management and appropriation and other
related actions with respect to provident
funds account of the employees were to be
performed by the Secretary (Trust) and
Director (Finance) of both the Trusts in
accordance with the directions issued by
the Central Government from time to time.
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1351

10. The amount deducted from the
salaries of the member employees of the
Uttar
Pradesh
State
Power
Sector
Employees Trust and the Uttar Pradesh
Corporation Contributory Provident Fund
Trust were forwarded to the Trust office by
all three Corporations which then were
required to be invested by the Secretary
(Trust) on the approval of Director
(Finance) and trustee and in accordance
with the directions issued from time to time
by the Board of Trustees in various
approved schemes.

11. On 08.05.2013, it was resolved by
the Board of Trustees of the U.P. State
Power Sector Employees Trust that the
amount of the General Provident Fund
would be invested in term deposits of the
nationalised Banks for a period of 1 to 3
years. Further, it was resolved in the
meeting of the Board of Trustees of the
Uttar
Pradesh
State
Power
Sector
Employees Trust on 21st April, 2014 that
in case there were alternative investment
avenues available which were as safe as
investment in the Banks and offered more
assured interests, they should be presented
after contemplation and, if needed then the
Director
(Finance)
should
be
duly
authorised
to
take
the
services
of
investment advisor.

12. In pursuance of the aforesaid
resolutions till October, 2016, Provident
Fund amounts of the two Trusts were
deposited in the Nationalised Banks in term
deposits accruing interest.

13. However, in the month of
December, 2016 on the proposal of the then
Secretary of the Trust, Mr. Praveen Kumar
Gupta, after obtaining the approvals from
the then Director (Finance), Mr. Sudhanshu
Dwivedi and the then Managing Director,
U.P.P.C.C.L.,
Mr.
A.P.
Mishra,
coaccused,they started investing the G.P.F.
and C.P.F. funds in the P.N.B. Housing
term deposits. In the same series, the G.P.F.
and C.P.F. funds were invested as term
deposits by Mr. Sudhanshu Dwivedi and
Mr. Praveen Kumar Gupta from March,
2017 in a private institution named Deewan
Housing Finance Ltd (hereinafter referred
to
as
''DHFL')
without
taking
the
recommendation/cognizance
of
M.D./Chairman and without any authority
of law in illegal and mala fide manner for
personal gains.

14. It is further alleged that
appropriation of funds was not done in
accordance with the notification dated 2nd
March, 2015 issued by the Ministry of
Finance, Government of India.It is further
alleged that according to the aforesaid
notification, the funds of non Government
Provident Fund could have been invested in
the unscheduled commercial banks to the
maximum limit of 50%.

15. It is alleged that the forged and
fabricated minutes of the meeting of the
Board of Trustees of the Contributory
Provident Fund allegedly held on 24th
March, 2017 were prepared. In the
aforresiad meeting it was allegedly
resolved that "the Board of Trustees
agreed
to
consider
the
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. As per prevailing practice,
further investment and the securities
would be decided by Secretary (Trust)
on the case to case basis with the
consent/approval of Director (Finance),
U.P.P.C.L. trustee.
1352 INDIAN LAW REPORTS ALLAHABAD SERIES

16. It has been alleged that as per
record available in the office of trust from
March, 2017 to December, 2018, the then
Secretary (Trust) Mr. Praveen Kumar
Gupta who was in charge of both C.P.F.
and G.P.F. Trust after obtaining approval
from the then Director (Finance), Mr.
Sudhanshu Dwivedi and transgressing the
clear directives of the Government of India
as contained in its notification dated 2nd
March, 2015 according to which clear
directions were issued that the moneys of
the employees Provident Fund should not
be invested in any of the institutions other
than scheduled/unscheduled commercial
banks, 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.

17. It is also alleged that according to
the records available, GPF contributions
amounting to Rs.2631.20 crores were
invested in DHFL out of which only
Rs.1185.50 crores have been received by
the trust office and an amount of
Rs.1445.70 crores plus interest is yet to be
received.
Similarly,
an
amount
of
Rs.1491.5 crores of the Contributory
Provident Fund was invested in the DHFL,
out of which Rs.669.3 crores have been
received by the office of the trust and
Rs.822.2 crores plus ineterest is yet to be
received.Thus,the
total
amount
of
Rs.2267.90 crores (Principal Amount) and
interest is yet to be received from the
DHFL.

18. It is alleged that the then Director
(Finance) and the Secretary Trust by not
following the directives issued by the
Government of India dated 2nd March,
2015 and investing more than 50% of the
amount of employees' GPF and CPF in
DHFL have committed the offence of
Criminal Breach of Trust.

19. Thus, allegations in sum and
substance
are
that
the
accused
in
furtherance of criminal conspiracy with
malafide intention for personal gain and in
violation of the relevant provisions of law,
have invested huge amount of two funds
i.e. Uttar Pradesh Power Sector Employees
General Provident Fund and Uttar Pradesh
Power Corporation Limited Contributory
Provident Fund in DHFL, a company
incorporated under the Companies Act.
Their malafide decision has caused huge
loss to these funds to the amount of
Rs.2267.9
crores
(Principal
Amount)
besides interest. The investigation has
revealed that the investments have been
made in the DHFL by the accused for
personal gain as they have received the
huge amount from DHFL as commission
for making such investments.

20. The aforesaid two trusts were
created under the Employees Provident
Fund and Miscellaneous Provisions Act,
1952 and rules made thereunder as well as
the provisions of Indian Trust Act, 1882.

21. Rule 11 of the Uttar Pradesh State
Sector Employees General Provident Fund
Rules 2000 which provides power and
function of the secretary of the Trust reads
as under:-

"(a) The Company Secretary of
the UPPCL shall function as the Secretary
of the Board.

(b) The Secretary will be assisted
by such staff for the efficient discharge of
his function as the Board may decide.

(c) The Director (Finance) of
UPPCL and the Secretary of the Board
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1353
shall jointly operate the accounts of the
Fund."

22. Rule 22 provides investment of the
Assets of the fund which reads as under:-

"22.Investment of the Assets of the
Fund:

(a) The trustees shall, subject to the
Provisions contained herein invest all money of
the Fund, in accordance with the provisions of
Section 418 of the Companies Act, 1956 and in
the manner prescribed by the Central
Government from time to time, in this behalf,
so however, that the securities in which the
money is invested shall be payable in India both
in respect of capital and interest.

Provided that the investments must
be in accordance with provisions laid down in
the Income Tax Rules, 1982 and as may be
prescribed by the RPFC.

(b) The Trustees may deposit such
sums of money as are not invested in
accordance with sub-rule (a) above or are
required for day to day needs of the Fund in a
Post Office Saving Bank Account or in any
Scheduled Bank, and open account or accounts
in such Bank or Banks for the purpose in the
name of the fund, and such accounts shall be
operated by the Director (Finance) of UPPCL
and the Secretary of the Board.

(c) All investments made or to be
made as aforesaid shall be held in the name of
the Fund."

23. Thus, according to the aforesaid Rule
22 the money of the Fund is to be invested in
accordance with the provisions of Section 418
of the Companies Act, 1956 and in the manner
prescribed by the Central Government from
time to time in this behalf. It is also provided
that the investments must be in accordance with
the provisions laid down in the Income Tax
Rules, 1962 and as may be prescribed by the
RPFC.

24. Similarly, some of the provisions of
UPPCL Contributory Provident Fund Rules,
2004 would be apt to make note of for disposal
of the present bail applications.

25. Rule 14 provides for investment of the
fund amount which reads as under:-

"14.0 Investment

(i) All moneys of the Fund shall be
invested expeditiously not later than the close of
the month of recovery subject to such directions
the Board may give from time to time. The
investments shall be in the securities mentioned
or referred to in clause (a) to (d) of Section 20
of the Indian Trust Act, 1882 (II of 1882),
provided that such securities are payable both in
respect of capital and in respect of interest in
India and in such other securities as the Central
Government may from time to time approve in
this regard. Furthermore guidelines issued by
the Ministry of Finance and Ministry of Labour
regarding investment pattern shall be followed
for making investment.

(ii) All expenses incurred in respect
of, and loss, if any, arising from any investment
shall be charged to the Fund."

26. Thus, 2004 Rules are Pari materia
provisions with the 2000 rules.

27. Section 20 of the Indian Trust Act,
1982 postulates that the investment shall be
made in the security satisfying clause (a) to (d)
for investment of Trust money reads as under:-

"20. Investment of trust-money.--
Where the trust property consists of money
and cannot be applied immediately or at an
early date to the purposes of the trust, the
trustee is bound (subject to any direction
contained in the instrument of trust) to
1354 INDIAN LAW REPORTS ALLAHABAD SERIES
invest the money on the following
securities and on no others:--

(a)in
promissory
notes,
debentures, stock or other securities3[of
any4[State
Government]
or]
of
the5[Central Government], or of the United
Kingdom
of
Great
Britain
and
Ireland:6[Provided that securities, both the
principal whereof and the interest whereon
shall have been fully and unconditionally
guaranteed by any such Government, shall
be deemed, for the purposes of this clause,
to be securities of such Government;

(b) in bonds, debentures and
annuities7[charged
or
secured
by
the8[Parliament
of
the
United
Kingdom]9[before the 15th day of August,
1947] on the revenues of India or of
the10[Governor-General in Council11] or
of any Province11]:12[Provided that after
the fifteenth day of February, 1916, no
money shall be invested in any such
annuity being a terminable annuity unless a
sinking fund has been established in
connection with such annuity; but nothing
in this proviso shall apply to investments
made before the date aforesaid;]

12[(bb)in India three and a half
per cent. stock, India three per cent. stock,
India two and a half per cent. stock or any
other capital stock13[which before the 15th
day of August, 1947, was] issued by the
Secretary of State for India in Council
under
the
authority
of
an
Act
of
Parliament14[of the United Kingdom] and
charged on the revenues of India;15[or
which16[was] issued by the Secretary of
State on behalf of the Governor-General in
Council under the provisions of Part XIII of
the Government of India Act, 1935];]

(c)in stock or debentures of, or
shares in, railway or other companies the
interest
whereon
shall
have
been
guaranteed by the Secretary of State for
India in Council; 15[or by the Central
Government] 15[or in debentures of the
Bombay 16[Provincial] Co-operative Bank
Limited, the interest whereon shall have
been guaranteed, by the Secretary of State
for India in Council] 13[or the State
Government of Bombay]; 17

(d)
in
debentures
or
other
securities for money issued, under the
authority of 18[any Central Act or
Provincial Act or State Act], by or on
behalf of any municipal body, port trust, or
city improvement trust in any Presidencytown or in Rangoon Town, or by or on
behalf of the trustees of the port of
Karachi:] 19[Provided that after the 31st
day of March, 1948, no money shall be
invested in any securities issued by or on
behalf of a municipal body, port trust or
city improvement trust in Rangoon Town,
or by or on behalf of the trustees of the port
of Karachi;]

(e) on a first mortgage of
immovable property situate in 20[any part
of the territories to which this Act extends]:
Provided that the property is not a lease
hold for a term of years, and that the value
of the property exceeds by one-third, or, if
consisting of buildings, exceeds by onehalf, the mortgage-money; 21[***] 22[(ee)
in units issued by the Unit Trust of India
under any unit scheme made under section
21 of the Unit Trust of India Act, 1963 (52
of 1963); or]

(f)
on
any
other
security
expressly authorized by the instrument of
trust, 22[or by the Central Government by
the notification in the Official Gazette] or
by any rule which the High Court may
from time to time prescribe in this behalf:
Provided that, where there is a person
competent to contract and entitled in
possession to receive the income of the
trust property for his life, or for any greater
estate, no investment on any security
mentioned or referred to in clauses (d), (e)
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1355
and (f) shall be made without his consent in
writing."

28. Section 418 of the Companies
Act, 1956 provides that the amount of
provident fund shall be deposited in the
post office, State Bank of India or in a
Nationalised Schedule Bank. The aforesaid
provision is applied to safeguard the
provident fund deposits of the employees.
However, it has been alleged that in clear
departure from the statutory provisions, the
applicant and co-accused for the purpose of
earning illicit brokerage, deposited the
provident funds amounts in DHFL, a
private entity and such investment was
completely unsafe and hazardous. As a
consequence of the illegal decisions and
actions of the applicant and other coaccused, Rs. 2267.90 crores (Principal
Amount) and interest of the provident
funds
of
the
employees
have
been
dishonestly misappropriated.

29. Section 418 of the Companies Act
1956 is reproduced here under:-

"418. Provisions applicable to
provident funds of employees.

(1)Where a provident fund has
been constituted by a company for its
employees or any class of its employees, all
moneys contributed to such fund (whether
by the company or by the employees) or
received or accruing by way of interest or
otherwiseto such fund shall, within fifteen
days from the date of contribution, receipt
or accrual, as the case may be, either-

(a)be deposited-

(i)in a post office savings bank
account, or

(ii)in a special account to be
opened by the company for the purpose in
the State Bank of India or in a Scheduled
Bank, or

(iii) where the company itself is a
Scheduled Bank, in a special account to be
opened by the company for the purpose
either in itself or in the State Bank of India
or in any other Scheduled Bank; or

(b)be invested in the securities
mentioned or referred to in clauses (a) to
(e) of section 20 of the Indian Trusts Act,
1882 (2 of 1882 ).

(2)Notwithstanding anything to
the contrary in the rules of any provident
fund to which sub- section (1) applies or in
any contract between a company and its
employees, no employee shall be entitled to
receive, in respect of such portion of the
amount to his credit in such fund as is
invested in accordance with the provisions
of sub- section (1), interest at a rate
exceeding the rate of interest yielded by
such investment.

(3)Nothing in sub- section (1)
shall affect any rights of an employee under
the rules of a provident fund to obtain
advances from or to withdraw money
standing to his credit in the fund, where the
fund is a recognised provident fund within
the meaning of clause (a) of section 58A of
the Indian Income- tax Act, 1922 (11 of
1922 ) 3, or where the rules of the fund
contain provisions corresponding to rules 4,
5, 6, 7, 8, and 9 of the Indian Income- tax
(Provident Funds Relief) Rules.

(4)Where a1trust has been created
by a company with respect to any provident
fund referred to in sub- section (1), the
company shall be bound to collect the
contributions of the employees concerned
and pay such contributions as well as its
own
contributions,
if
any,
to
the
trustees2within fifteen days from the date
of collection]; but in other respects, the
obligations laid on the company by this
section shall devolve on the trustees and
shall be discharged by them instead of by
the company."
1356 INDIAN LAW REPORTS ALLAHABAD SERIES

30.

Relevant
portion
of
the
notification dated 2nd March, 2015 issued
by Ministry of Finance is reproduced
hereunder:-

"F.
No.
11/14/2013-PR.--In
partial modification of this Ministry's
Notification No. 5(88)/2006-PR dated 14th
August, 2008, the pattern of investment to
be followed by Non-Government Provident
Funds, Superannuation Funds and Gratuity
Funds shall be as follows, effective from
1st April, 2015:--

Category Investment
Pattern
Percentage
amount to be
invested
(i)
Government
Securities
and
Related
Investments
Government
Securities,
Other Securities
{''Securities' as
defined
in
section 2(h) of
the
Securities
Contracts
(Regulation)
Act, 1956} the
principal
whereof
and
interest
whereon is fully
and
unconditionally
guaranteed
by
the
Central
Government or
any
StateGovernme
nt.
The
portfolio
Minimum
45%and
upto 50%
invested under
this
subcategory
of
securities shall
not be in excess
of 10% of the
total
portfolio
of the fund.
Units of Mutual
Funds set up as
dedicated funds
for investment
in
Govt.
securities
and
regulated by the
Securities
and
Exchange
Board ofIndia:
Provided
that
the
portfolio
invested in such
mutual
funds
shall
not
be
more than 5%
of
the
total
portfolio at any
point of time
and
fresh
investments
made in them
shall not exceed
5% of the fresh
accretions in the
year.
(ii)
Debt
Instruments and
Related
Investments
Listed
(or
proposed to be
listed in case of
fresh issue) debt
securities issued
by
bodies
Minimum
35%and
upto 45%
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1357
corporate,
including banks
and
public
financial
institutions
(''Public
Financial
Institutions'
as
defined
under
Section 2 of the
Companies Act,
2013),
which
have
a
minimum
residual
maturity period
of three years
from the date
ofinvestment.
Basel III Tier-I
bonds issued by
scheduled
commercial
banks
under
RBI Guidelines:
Provided that in
case of initial
offering of the
bonds
the
investment shall
be made only in
such
Tier-I
bonds which are
proposed to be
listed.
Provided further
that investment
shall be made in
such bonds of a
scheduled
commercial
bank from the
secondary
market only if
such
Tier
I
bonds are listed
and
regularly
traded.
Total portfolio
invested in this
sub-category, at
any time, shall
not
be
more
than 2% of the
total
portfolio
of the fund.
No investment
in
this
subcategory
in
initial offerings
shall
exceed
20%
of
the
initial offering.
Further, at any
point of time,
the
aggregate
value of Tier I
bonds of any
particular bank
held by the fund
shall not exceed
20%
of
such
bonds issued by
that Bank.
Rupee
Bonds
having
an
outstanding
maturity of at
least
3
years
issued
by
institutions
of
the International
Bank
for
Reconstruction
and
Development,
International
Finance
Corporation and
Asian
1358 INDIAN LAW REPORTS ALLAHABAD SERIES
DevelopmentBa
nk.
Term
Deposit
receipts of not
less than one
year
duration
issued
by
scheduled
commercial
banks,
which
satisfy
the
following
conditions
on
the
basis
of
published
annual report(s)
for
the
most
recent years, as
required to have
been published
by
them
underlaw:
having declared
profit
in
the
immediately
preceding three
financialyears;
maintaining
a
minimum
Capital to Risk
Weighted
Assets Ratio of
9%,
or
mandated
by
prevailing RBI
norms,
whichever
ishigher;
having net nonperforming
assets
of
not
more than 4%
of
the
net
advances;
having
a
minimum
net
worth
of
not
less than Rs.
200Crores.
Units of Debt
Mutual
Funds
as regulated by
Securities
and
Exchange
Board of India:
Provided
that
fresh
investment
in
Debt
Mutual
Funds shall not
be more than
5% of the fresh
accretions
invested in the
year
and
the
portfolio
invested
in
them shall not
exceed 5% of
the
total
portfolio of the
fund
at
any
point in time.
The
following
infrastructure
related
debtinstruments
:
Listed
(or
proposed to be
listed in case of
fresh issue) debt
securities issued
by
body
corporates
engaged mainly
in the business
of development
or operation and
maintenance of
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1359
infrastructure,
or development,
construction or
finance of low
costhousing.
Further,
this
category
shall
also
include
securities issued
by
Indian
Railways or any
of
the
body
corporates
in
which
it
has
majorityshareho
lding.
This
category
shall
also
include
securities issued
by
any
Authority of the
Government
which is not a
body corporate
and has been
formed mainly
with
the
purpose
of
promoting
development of
infrastructure.
It
is
further
clarified
that
any
structural
obligation
undertaken
or
letter of comfort
issued by the
Central
Government,
Indian Railways
or
any
Authority of the
Central
Government,
for any security
issued
by
a
body corporate
engaged in the
business
of
infrastructure,
which
notwithstanding
the terms in the
letter of comfort
or
the
obligation
undertaken,
fails to enable
its inclusion as
security covered
under category
(i) (b) above,
shall be treated
as an eligible
security
under
this
subcategory.
Infrastructure
and affordable
housing Bonds
issued by any
scheduled
commercial
bank,
which
meets
the
conditions
specified
in
(ii)(d)above.
Listed
(or
proposed to be
listed in case of
fresh
issue)
securities issued
by
Infrastructure
debt
funds
operating as a
Non-Banking
1360 INDIAN LAW REPORTS ALLAHABAD SERIES
Financial
Company
and
regulated
by
Reserve
Bank
ofIndia.
Listed
(or
proposed to be
listed in case of
fresh
issue)
units issued by
Infrastructure
Debt
Funds
operating as a
Mutual
Fund
and
regulated
by
Securities
and
Exchange
Board ofIndia.
It is clarified
that,
barring
exceptions
mentioned
above, for the
purpose of this
sub-category
(f),
a
sector
shall be treated
as
part
of
infrastructure as
per Government
of
India's
harmonized
master-list
of
infrastructure
sub-sectors:
Provided
that
the investment
under
subcategories
(a),
(b) and (f) (i) to
(iv)
of
this
category
No.
(ii)
shall
be
made only in
such securities
which
have
minimum
AA
rating
or
equivalent
in
the
applicable
rating
scale
from
at
least
two
credit
rating agencies
registered with
Securities
and
Exchange
Board of India
under Securities
and
Exchange
Board of India
(Credit
Rating
Agency)
Regulation,
1999. Provided
further that in
case of the subcategory (f) (iii)
the ratings shall
relate
to
the
Non-Banking
Financial
Company
and
for
the
sub-
category (f) (iv)
the ratings shall
relate
to
the
investment
in
eligible
securities rated
above
investment
grade
of
the
scheme of the
fund.
Provided further
that
if
the
securities/entitie
s
have
been
rated by more
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1361
than two rating
agencies,
the
two lowest of
all the ratings
shall
beconsidered.
Provided further
that investments
under
this
category
requiring
a
minimum
AA
rating,
as
specified above,
shall
be
permissible
in
securities
having
investment
grade
rating
below AA in
case the risk of
default for such
securities
is
fully
covered
with
Credit
Default Swaps
(CDSs)
issued
under
Guidelines
of
the
Reserve
Bank of India
and
purchased
along with the
underlying
securities.
Purchase
amount of such
Swaps shall be
considered to be
investment
made
under
thiscategory.
For
subcategory (c), a
single rating of
AA or above by
a domestic or
international
rating
agency
will
be
acceptable.
It is clarified
that
debt
securities
covered
under
category (i) (b)
above
are
excluded from
this
category
(ii).
(iii)
Short-term Debt
Instruments and
Related
Investments
Money market
instruments:
Provided
that
investment
in
commercial
paper issued by
body corporates
shall be made
only
in
such
instruments
which
have
minimum rating
of A1+ by at
least two credit
rating agencies
registered with
the
Securities
and
Exchange
Board of India.
Provided further
that
if
commercial
paper has been
rated by more
Upto 5%
1362 INDIAN LAW REPORTS ALLAHABAD SERIES
than two rating
agencies,
the
two lowest of
the ratings shall
be considered.
Provided further
that investment
in
this
subcategory
in
Certificates
of
Deposit of up to
one
year
duration issued
by
scheduled
commercial
banks,
will
require the bank
to
satisfy
all
conditions
mentioned
in
category (ii) (d)
above.
Units of liquid
mutual
funds
regulated by the
Securities
and
Exchange
Board of India.
Term
Deposit
Receipts of up
to
one
year
duration issued
by
such
scheduled
commercial
banks
which
satisfy
all
conditions
mentioned
in
category
(ii)
(d)above.
(iv)
Equities
and
Related
Investments
Minimum 5%
and upto 15%
Shares of body
corporates listed
on
Bombay
Stock Exchange
(BSE)
or
National Stock
Exchange
(NSE),
which
have:
Market
capitalization of
not less than Rs.
5000 crore as
on the date of
investment;and
Derivatives
with the shares
as
underlying,
traded in either
of
the
two
stockexchanges.
(b)
Units
of
mutual
funds
regulated by the
Securities
and
Exchange
Board of India,
which
have
minimum 65%
of
their
investment
in
shares of body
corporates listed
on BSE or NSE.
Provided
that
the
aggregate
portfolio
invested in such
mutual
funds
shall not be in
excess of 5% of
the
total
portfolio of the
fund
at
any
point in time
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1363
and the fresh
investment
in
such
mutual
funds shall not
be in excess of
5% of the fresh
accretions
invested in the
year.
Exchange
Traded
Funds
(ETFs)/Index
Funds regulated
by
the
Securities
and
Exchange
Board of India
that
replicate
the portfolio of
either
BSE
Sensex Index or
NSE
Nifty
50Index.
ETFs issued by
SEBI regulated
Mutual
Funds
constructed
specifically for
disinvestment
of shareholding
of
the
Government of
India
in
bodycorporates.
Exchange
traded
derivatives
regulated by the
Securities
and
Exchange
Board of India
having
the
underlying
of
any permissible
listed stock or
any
of
the
permissible
indices, with the
sole
purpose
ofhedging.
Provided
that
the
portfolio
invested
in
derivatives
in
terms
of
contract
value
shall not be in
excess of 5% of
the
total
portfolio
invested in subcategories (a) to
(d) above.
(v)
Asset
Backed,
Trust Structured
and
Miscellaneous
Investments
Commercial
mortgage based
Securities
or
Residential
mortgage based
securities.
Units issued by
Real
Estate
Investment
Trusts regulated
by
the
Securities
and
Exchange
Board ofIndia.
Asset
Backed
Securities
regulated by the
Securities
and
Exchange
Board ofIndia.
Units
of
Upto 5%
1364 INDIAN LAW REPORTS ALLAHABAD SERIES
Infrastructure
Investment
Trusts regulated
by
the
Securities
and
Exchange
Board of India.
Provided
that
investment
under
this
category No. (v)
shall only be in
listed
instruments
or
fresh issues that
are proposed to
be listed.
Provided further
that investment
under
this
category
shall
be made only in
such securities
which
have
minimum
AA
or
equivalent
rating
in
the
applicable
rating
scale
from
at
least
two
credit
rating agencies
registered
by
the
Securities
and
Exchange
Board of India
under Securities
and
Exchange
Board of India
(Credit
Rating
Agency)
Regulations,
1999. Provided
further that in
case of the subcategories
(b)
and
(d)
the
ratings
shall
relate
to
the
rating
of
the
sponsor
entity
floating
thetrust.
Provided further
that
if
the
securities/entitie
s
have
been
rated by more
than two rating
agencies,
the
two lowest of
the ratings shall
beconsidered.

31. Heard Mr. Saurabh Shankar
Srivastava and Mr.P. Chakravarty, learned
counsels for the applicants, Mr. V.K Shahi,
learned Additional Advocate General and
Mr. Anurag Verma for the State.

32.

The
applicant,
Sudhanshu
Dwivedi
was
appointed
as
Director
(Finance) of UPPCL on 30th June, 2016.In
the capacity of Director (Finance) of
UPPCL, he became Trustee of the aforesaid
two trusts.

33. So far as accused-applicant,
Sudhanshu
Dwivedi
is
concerned,
Mr.Saurabh Shankar Srivastava, learned
counsel has submitted that it was largely
the secretary of the trust who was also the
General Manager (Finance and Accounts)
of U.P.P.C.L. who in fact was looking after
its day to day operations along with his
assisting team. He has further submitted
that initially the monies of the provident
funds were invested in term deposits with
the schedule Nationalised Banks. However,
3-5 All. Sudhanshu Dwivedi Vs. State of U.P.
1365
when better interest rates were offered by
unscheduled
commercial
banks,
they
became the preferred investment avenues.
After
demonetisation
and
following
economic slowdown, the term deposits
with the banks started yielding much lower
rates of interest and as such the Board of
Trustees in the best interest of the
employees, explored the new investment
avenues and, therefore, it was collectively
decided by the trustees that the investment
can be done in the AAA rated Housing
Finance Companies which were duly
recognised by the National Housing Bank,
a body constituted under the National
Housing Bank Act, 1987 which gives due
recognition
to
the
housing
finance
Companies operational in India on the basis
of several qualifying variables. He has
further submitted that in December 2016, it
was unanimously resolved by the Board of
Trustees that in order to get best returns on
the funds, the monies would be invested in
the term deposits with Punjab National
Bank Housing Company which yielded
better returns than those offered by the
banks.

34. The Secretary of the trust
informed that better rates were offered by
DHFL which was a AAA rated company
and was also duly recognised by the
National Housing Bank. Thereafter, an
opinion was sought from all the trustees
including the applicant.