India probes L&T’s employee welfare arm for alleged fraud
India is inspecting accounts of L&T Employees Welfare Foundation Pvt Ltd, a unit of Larsen and Toubro Ltd., for allegations of cheating and misappropriation of funds, people with knowledge of the matter said.
The Registrar of Companies has issued a notice to two companies — LandT Welfare Co Ltd. and L&T Employees Welfare Foundation — seeking their response, and a report is expected by the end of September, the people said asking not to be identified as the matter is not public. The inspection was ordered after an internal inquiry into the allegations made a case for the probe.
The probe follows complaints by a group of employees who alleged that the company deducted contributions from their salaries with the assurance of giving them equity shares of Larsen & Toubro, India’s biggest engineering conglomerate, but instead gave them redeemable preference shares of LandT Welfare Co. The funds collected for employee welfare were allegedly used for expansion by L&T, according to the complaint.
A spokesperson for the corporate affairs ministry did not immediately answer the calls Friday. A company spokesperson said L&T has contested the allegations and “the matter is sub-judice.” Earlier, in 2018, a shareholder and former employee of L&T had filed a petition in the national company law tribunal alleging mismanagement of employee welfare fund and assets of the company.
The complainants alleged the management collected around 1.50 billion rupees between November 2003 and March 2008 from 30,000 employees and bought shares of L&T which is now worth 176 billion rupees ($2.37 billion). Issuing redeemable preference shares instead of the equity shares, the employees have been defrauded and deprived of the appreciation, according to the complaint.
Larsen & Toubro Ltd. posted a smaller-than-expected profit in the quarter ended June as the second wave of coronavirus hit the country just as it was recovering from a strict lockdown. The company maintained its low-to-mid teen growth guidance for orders and revenue for the financial year ending March 2022.
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