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FTIL-MCX software contract was one-sided: PwC

Sources indicate that the PWC report has raised questions on the some of the contracts entered into by MCX above Rs 25 lakhs

Jayshree Pyasi & Sharleen D'souza  |  Mumbai 

Following its special audit of the Multi-Commodity Exchange (MCX), PricewaterhouseCoopers has given a report to the exchange and the Forward Markets Commission (FMC), in which it has pointed violations of corporate governance norms.

A source said among the major findings in the report was a technology supply contract by the anchor investors involving a payout of about Rs 1,000 crore by the exchange. The contract, PwC said, was one-sided and favoured Financial Technologies India Ltd (FTIL), MCX’s promoter and technology and software supplier.

Sources in the know said MCX and FTIL had a software contract for 33 years, renewable twice up to 99 years. The rationale behind this transaction wasn’t made clear to the auditor. It is understood the value of the contract was Rs 800-1,000 crore.

The income tax department has initiated a preliminary inquiry into the issue; it is also probing whether the deal had violated transfer pricing norms.

An MCX spokesperson wasn’t available for comment.

Sources said the PWC report raised questions on some contracts entered into by MCX, which were valued at more than Rs 25 lakh.

It is expected an MCX board meeting scheduled for Saturday will take up the issue.

An FTIL spokesperson said, “All transactions between MCX and FTIL are purely based on commercial agreements. Neither PwC nor MCX shared or took views from FTIL on its audit. The campaign run against FTIL is highly motivated, with vested interests. FTIL created world-class institutions such as MCX.”

The Securities and Exchange Board of India is examining PwC’s audit report, as the commodity exchange is a listed entity. A Sebi official said the regulator was examining whether the listing agreement and corporate governance norms had also been flouted. However, it is yet to share the report with the BSE, on which MCX is listed.

The FMC has asked MCX to take appropriate action on the violations pointed to by the auditor. It has asked the exchange to submit a report on the matter by May 5.

PRICELY REPORT


* The technology supply contract by the anchor investors involving a payout of about Rs 1,000 cr by MCX favoured FTIL

* MCX and FTIL had a software contract for 33 years, renewable twice up to 99 years, sources say

* The value of the contract was likely at Rs 800-1,000 cr

* An MCX board meeting scheduled for Saturday is likely to take up the issue

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First Published: Thu, April 24 2014. 00:42 IST
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