PSU bank nominees on MCX-SX board get CAG flak

Government auditor CAG today pulled up PSU bank nominees on the board of MCX-SX for their failure to protect the interest of shareholders by flagging the issue of unfavourable agreements it had entered into with the promoter, FTIL.
Observing that MCX-SX had entered into long-term agreements with its related party Financial Technologies (India) Ltd (FTIL) that entailed various restrictive clauses as well as high costs, the CAG said the PSU bank nominees failed to review those agreements.
"The PSU banks had 67 per cent shareholding as of March 31, 2010 and had their nominees on the board of the company (MCX-SX) during April 30, 2010, to September 20, 2012. These nominees of PSU banks on the board of MCX-SX did not review these unfavourable agreements and failed to protect the interest of the banks they represented," said the CAG report, which was tabled in the Rajya Sabha.

It further said that despite the action of new management by way of suspension of various agreements with FTIL, "the liability due to restrictive clauses in these agreements would continue as only interim action to suspend only a few agreements has been taken (January 2015)".
MCX-SX, CAG said, had entered into long-term agreements with FTIL for its exchange operations, which included purchase and maintenance of software and network infrastructure services.
"These agreements had restrictive clauses that were against the interest of the company which made exit from the agreements by way of termination and finding alternative vendor difficult for the company. MCX-SX made a total payment of Rs 303.75 crore to FTIL during 2008-09 to 2013-14 which amounted to 52 per cent of the total expenditure of the company," CAG said.

The Comptroller and Auditor General (CAG) has also raised questions over the payment of gratuity amounting to Rs 53.31 lakh to Joseph Massey, the then MD and CEO of the company, saying it was not in order as he had served for less than six years for the company.