India?s second largest non-banking finance company and the custodian of retirement savings of over four crore workers ? Employees? Provident Fund Organisation ? was rattled on Friday morning. The Central Bureau of Investigation started a nation-wide crackdown on one of its seniormost officials, second only to the recently appointed Central PF Commissioner K Chandramouli.

The CBI has registered a case against additional central provident fund commissioner SK Khanna who is in charge of EPFO?s entire North India operations, for amassing wealth way beyond his income, in a multitude of cases through his tenure with EPFO?s various regional offices. Simultaneous raids began at seven in the morning on Friday not just in Khanna?s residence as well as office inside the EPF building at Wazirpur in the capital, but also at the residences of his relatives in the city.

Raids were also conducted in Hyderabad-based Madhucon Constructions office, which was allegedly involved in routing kickbacks to Khanna through his relatives. EPF branch offices in Kolkata were also raided in relation with a highly unusual case involving the sale of a British-owned jute mill and all its assets for a paltry Rs 1.5 crore.

Khanna has also been running a private book publishing firm which had supplied textbooks to government offices and other educational institutions, though government servants? service rules explicitly prohibit them from carrying on business of any nature.

CBI conducted searches at 10 places in Delhi and

Hyderabad in this connection, spokesperson of the agency told a news agency. ?Documents have been recovered during the searches. These are being scrutinised for further investigation,? said the official.

Among the several allegations against Khanna, the most startling and ingenious case occurred in 2001. The EPFO office in Kolkata had stepped in to ensure that more than 20,000 workers at mills of West Bengal-based Azmara PLC get their dues, which were not paid for the previous 20 years. However, the entire property of the company worth at least Rs 400 crore were sold of at a meager Rs 1.5 crore to some private firms. The assets included a huge land bank of 600 acres with a 33-acre golf course on the banks of the Hoogly along with the mills.

The company complained to the PMO through the British diplomatic channels and the case was referred to CBI. The EPFO?s Delhi office was also asked to undertake a departmental inquiry. ?It appears that the regional PF commissioner, Kolkata, while ostensibly seeking to recover outstanding dues became an instrumentality in the hands of private persons who were acting with ulterior motives to acquire the mills,? an independent probe stated.

Azmara PLC, also known as Titagurh Jute Factory PLC, faced liquidity crisis in the 1980-90s and defaulted on payment of PFs and other statutory dues, which grew to Rs 45.75 crore by 1999. Resultantly, the company faced many legal cases. The court sought to avoid its closure and protect workerss? livelihood by ordering that the company could be run by raw jute suppliers. As a result, likes of the Poddars and the Oswals took charge. The licensees were given the jute mills on the conditions of payment of monthly fees and remittance of provident fund dues, but none was observed. Instead of canceling the licences, the region PF office facilitates purchase of shares by the licensees.

In the late 1990s, the holding company was handed over to Graham Avery to facilitate regaining control of the jute mills, pay off creditors and turn the company around. Avery proposed selling part of the 600 acres of land to a multinational company. Titagurh?s shares were de-listed from the British exchanges in 1991-1992, following an insider trading scandal. The Regional Provident Fund Commissioner took action against Avery for long-pending PF dues in May 1999. The police arrested Avery. Having Avery out of the way, the licensees could now do whatever they wanted with the company.

During January-July 2001, the local provident fund recovery officer took over the title deeds of assets, including share certificates, of the group. However, the officer did not dispose of land and building but started selling the shares in the companies. Most procedures were not followed in the case. The unlisted shares were not valued, wide publicity was not given to the sale, and the sale was outsourced to arbitrarily selected brokers. Moreover, the process of disposal was finished in a few days. In normal course, any government recovery proceeding takes at least two years.

Three invitation letters were sent to 12 brokers for selling the shares from August 8 to 10, 2001. It was alleged that the share broker who organised the deals, had existing business relationships with the licensees. Suraj Poddar, a director in the licensee company Aditya Translink, was appointed as the standing legal counsel by the regional provident fund office.

The report found that the Oswals and the Poddars controlled the jute companies as licensees, the front companies that acquired the shares in the auctions and their financier, Chariot Leasing. Kaul?s team also managed to trace Rs 2 crore from Chariot Leasing to the share purchasing companies.

For the workers? PF dues, the new owners argued that the department should collect Rs 38 crore dues, as on August 2003, from the holding company.

However, as per Section 108 of the Companies Act, transfer of more than 10% shares in foreign companies like Samnuggur and Victoria needs the prior approval of the central government. The PF office did ask the RBI for guidelines on the sale of foreign company shares. On this, Titagurh filed a petition in the Calcutta High Court in 2001 against the transaction. However, the case was withdrawn later apparently due to wrong facts.