Reliance Capital board denies all violations, may drag PwC to court

The board of Reliance Capital (RCap) on Thursday denied all violations raised by erstwhile auditor PricewaterhouseCoopers (PwC) in its letter to the Ministry of Corporate Affairs (MCA).

“The company is planning to take legal actions against PwC after an independent investigation conducted by top law firms revealing there was no diversion of funds by the company, which was the primary allegation of PwC against RCap,” sources close to the company said.

In its resignation letter, PwC had cast doubts over appropriateness of certain transactions of the two Anil Ambani group firms — Reliance Capital and Reliance Home Finance. 

The firm’s resignation letter cited Section 143 (12) of Companies Act, which requires an auditing firm to report matter to relevant authorities if it has reason to believe that an offence or fraud is being committed.

“The board took note of the views of the other joint auditors, who had been the auditors of the firm for the past three financial years and continued as sole statutory auditors of the firm, confirming that there are no violations as alleged by PwC under Section 143(12) of the Companies Act, 2013”, Reliance Capital said in a filing to the exchanges.

It said PwC had duly audited the accounts for FY18, as also limited review of financial results of three consecutive quarters ended December 2018, without any qualifications or raising any objection. Also, the board had appointed legal experts who carried out an independent investigation on the concerns raised by PwC. 

“The board noted the independent legal opinion from a reputed law firm confirming that there was no violation attracting Section 143(12) of the Companies Act, and which concluded that the PwC letter is devoid of any rationale or basis and is invalid,” RCap said.

PwC resigned as statutory auditor of the RCap and Reliance Home Finance in June citing various reasons after which the auditor was slapped with legal notice. Reliance Capital had said it complied and furnished all requisite details asked by PwC.

“The board noted the alleged basis relied upon by PwC for reporting under Section 143(12) is itself grossly inadequate and does not even point to a single specific instance of alleged fraud,” the company added.  

The board alleged PwC chose not to attend the audit committee meeting on June 12 despite being invited and resigned abruptly. 

Moreover, the board alleged the erstwhile auditor failed to share the letter, which it had written to the MCA, with the company or with the audit committee of the company despite repeated requests from the company.