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May 10, 2002 | 1356 IST
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Home Trade, Giltedge in deals with seamen's PF

BS Banking & Markets Bureaux

The gilts scam has spread beyond the co-operative banks to provident funds.

The Seamen's Provident Fund has discovered that it does not have Rs 928 million of securities to back certain transactions.

The money was invested in government securities and bonds of public sector undertakings through the Kolkata-based Pacific Finance, Dalhousie Securities, Podar Trading Company and Hooghly Trading & Investments.

These broking companies operated through the Mumbai-based Home Trade and Giltedge Management Services.

Incidentally, Dalhousie Securities is the second largest shareholder in Home Trade, which along with four other broking firms, has been named in the FIR filed by the Nagpur District Co-operative Bank for defrauding the bank.

"The securities were kept with them and, even after repeated attempts to obtain them, were never made available.

"The fund also did not get the interest, which was due in April 2002. Till that time the interest was received in the form of additional securities. Even those securities were never received. We only got letters confirming the deals," D T Joseph, director-general of shipping, told Business Standard.

Joseph said the commissioner for the Seamen's Provident Fund, Anup Kumar Gond, was approached by Ketan Seth of Giltedge and Shailesh Mehta, an associate of Seth, about investing in government securities and PSU bonds.

The initial transactions with the duo started in September 1998. "The commissioner told us about the development on May 4," he said.

"I went to Kolkata on May 6 to check the addresses of the brokers but it seems that all the addresses are fictitious. Our audit started immediately after that. We also approached our solicitors yesterday," said Joseph.

A senior employee at the Giltedge office in Vile Parle, a Mumbai suburb, said: "The management is not available for comment."

However, later the company sent a fax saying: "This is to clarify that no outstanding delivery of security or any payment is pending to Seamen's Provident Fund by us on date. Kindly, note that the said payment of Rs 910 million, for which delivery is pending ...was never received by us." The fax said the statement could be attributed to Giltedge Management Services' promoter Ketan Sheth.

Joseph could not pinpoint who was to be blamed. "No proper record exists on the transaction details between HomeTrade and Giltedge. The other companies are non-existent. Ketan Seth and Shailesh Mehta came to take the cheques. We are in dialogue with the police and the CBI on the matter," he said.

The provident fund was formed under the Seamen's Provident Fund Act 1966. The total corpus of the fund, including the securities, is around Rs 4.40 billion, of which around Rs 3.34 billion is in a special deposit with the State Bank of India and around Rs 15 million in ICICI bonds.

Till 1996, the Reserve Bank of India was in charge of the funds. However, with regulations changing, the management of the provident fund moved out of RBI hands.

Since November 1996, the fund started taking in-house investment decisions after a board resolution was passed making the Provident Fund Commissioner in charge of the fund.

It had initially approached Darashaw & Co to manage the fund. However, there was a difference of opinion on selling the shares of one of the companies the fund had.

In the meantime, Ketan Seth approached the fund and offered to sell these shares at a higher price.

Incidentally, government auditors never found anything amiss all these years. "It seems the auditors were only concerned whether the investments were made according to government rules," Joseph pointed out.

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