Jharkhand HC orders CBI probe into CMPFO-DHFL loss

Ranchi: The Jharkhand High Court has directed the Central Bureau of Investigation (CBI) to register an FIR and investigate the loss of Rs. 727.67 crore suffered by the Coal Mines Provident Fund Organisation (CMPFO) following its investment in Dewan Housing Finance Corporation Limited (DHFL).

A division bench of Chief Justice M.S. Sonak and Justice Manoj Prasad issued the direction while hearing a public interest litigation filed by the Coal Employees Welfare Association and another petitioner. The case is titled Coal Employees Welfare Association and another vs Union of India and others, W.P. (PIL) No. 4486 of 2022.

The court directed the CBI to take over the investigation into the role of all persons concerned, including officials and others, and complete it expeditiously in accordance with law.

Warnings over investment were not acted upon

According to the court’s order, CMPFO had invested approximately Rs. 1,300 crore in DHFL despite warnings from financial experts advising officials to withdraw the funds to avoid substantial losses. The investment was not withdrawn in time, resulting in a loss of Rs. 727.67 crore.

The petitioners alleged that the loss had not been properly investigated and sought action against those responsible. They expressed apprehension that officials were attempting to shield those involved or prevent a meaningful investigation.

The court took particular exception to an affidavit filed by CMPFO Regional Commissioner-II Pankaj Kumar. The affidavit stated that a major penalty charge sheet had been issued against former CMPFO Commissioner Animesh Bharti on May 17, 2024, and that departmental proceedings were pending.

Despite this, the affidavit characterised the loss as a commercial consequence of the resolution process under the Insolvency and Bankruptcy Code and stated that the matter did not disclose criminal conspiracy or criminal breach of trust warranting a separate CBI FIR.

The bench questioned how such a conclusion could be reached before the departmental proceedings had concluded. It also expressed concern that the organisation appeared to have given its officials a clean chit without a meaningful inquiry into the circumstances of the loss.

Court distinguishes investment loss from criminal wrongdoing

The bench clarified that every investment loss does not amount to a criminal offence. Negligence or an error of commercial judgment, without dishonest intention, does not by itself establish criminal liability.

However, the court found that the circumstances in this case warranted a criminal investigation. These included the scale of the public funds invested, warnings about DHFL’s financial position, the failure to withdraw the investment in time and the subsequent loss.

The court held that a prima facie case existed for investigating possible offences, including criminal breach of trust and criminal conspiracy.

It also observed that the investigation could not be left solely to the organisation whose officials had apparently reached conclusions about responsibility before the departmental proceedings were complete. Departmental action, the bench said, was not a substitute for a criminal investigation because the two processes follow different standards of proof and procedures.

Compensation decision deferred

The High Court declined to order compensation at this stage, holding that the issue would depend on the outcome of the investigation. It allowed the petitioners to seek compensation at the appropriate stage.

The bench also clarified that its observations were preliminary and limited to deciding whether a CBI investigation was warranted. They should not be treated as findings of guilt against individuals who had not been heard, nor should they influence the agency’s independent investigation.