IL&FS' transaction with MCX under investigation

As per a document filed with the Ministry of Corporate Affairs, MPPL was a subsidiary of Ovira in FY09-10 at the time of the transaction and Ovira, in turn, was a subsidiary of IL&FS.

“The objective of appointing Ovira and MPPL, which were subsidiaries of IL&FS as consultants on the deal, when IL&FS was already identified as a purchaser appears to be questionable,” PW pointed out in the report.

It also raised concern on the amount paid as consulting charges. “The placement fee to Ovira was Rs 8.60 crores (5.4 percent of the deal value) and to MPPL was Rs 9.11 crores (5.72 percent of the deal value). However, comparative quotes obtained by MCX in April 2014 from other merchant banker were in the range of 2 to 2.5 percent of the deal value. The rationale of paying a higher fee to MPPL and Ovira than the industry benchmark was unclear”.

Following PW’s observations and follow up from the Forward Market Commission, MCX initiated action on the matter. However, Moneycontrol has no clarity if MCX was able to trace these subsidiaries and send recovery notices. This case pending in Bombay High Court came up for a hearing last year.

The Income tax department is also assessing accounts of MCX on the basis of the PW forensic audit report. However, a Bombay High Court order on October 1 gave partial relief to MCX from a special audit requested by the tax department. The court has asked the I-T department to conduct normal assessment for 2010-2011, year under consideration.