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PwC report on MCX: FTIL threatens legal action against Auditor

Posted Date : 29-Apr-2014 , 10:06:53 pm | Posted By CASANSAAR print Print

Financial Technologies, which has 26 per cent stake in MCX, today rejected the PwC special audit report on the corporate governance issue at the commodity exchange and said it will take legal action against the bourse and PwC for painting a wrong picture in the report. 

Financial Technologies IndiaBSE 4.94 % Ltd (FTIL) had set up the commodity exchange MCX, but it no more controls MCX after a regulatory order passed in the wake of Rs 5,600-crore payment crisis at FTIL's subsidiary NSEL. 

Commodity markets regulator FMC had appointed PwC in December last year to audit books of MCX to examine if NSEL arm Indian Bullion Markets Association and FTIL's subsidiary National Bulk Handling Corporation (NBHC) traded on MCX. 

"FTIL has neither received the PwC report nor PwC has consulted or sought clarification on the report prepared by PwC. We deny strongly the convenient reports appearing on the media on the findings of the special audit done by PWC on MCX," the company said in a statement. 

Last week, the Board of MCX had decided to take action on the "adverse findings" of PricewaterhouseCoopers' (PwC) special audit report. 

"FTIL confirms that no transaction with MCX has violated any legal provisions of corporate law or taxation and it will vehemently pursue legal action against MCX and PwC for painting a wrong picture in its audit report," FTIL said. 

FTIL charged that MCX has violated principle of natural justice by not sharing the report and not allowing FTIL to provide clarification on PWC findings. 

"This report is intentionally leaked at the time when FTIL is in the process of divestment of equity shares of MCX. FTIL sees such selective leakages as malicious, highly defamatory and motivated with vested interests," the statement added. 

FTIL is in the process of reducing its stake in MCX to 2 per cent from the existing 26 per cent after FMC declared the company unfit to run any exchange and also ordered it not to hold more than 2 per cent stake in MCX. 

It noted that MCX had made all the necessary disclosures in IPO prospectus, including all the related party contracts. 

FTIL argued that all the major terms and conditions of related party transactions were in public domain. Moreover, it said that both FTIL and MCX have disclosed related parties transaction in their annual reports. 

"All transactions carried out between MCX and FTIL are based on commercial agreements with FTIL creating long term infrastructure platform in terms of technology back-bone and support for the exchange. The question of transfer pricing is not at all applicable. FTIL has paid all the necessary taxes for the services performed & revenue earned by the company," the statement said. 

Moreover, FTIL said that MCX's financial and operations has been audited by statutory auditor of international repute like Deloitte Haskins and Touche and KPMG associates for the last 10 years besides being regularly audited by the FMC. (PTI)

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