FT group auditors run for cover after Mayaram panel's report
NSUNDARESHA SUBRAMANIAN & SURAJEET DAS GUPTA
New Delhi, 26 October
The adverse remarks in the report of a special team that probed the ₹
5,600crore ' payment crisis' have jolted the auditors of the National
Spot Exchange Limited ( NSEL) and Financial Technologies India Limited
( FTIL).
The Special Team of Secretaries ( STS) headed by Economic Affairs
Secretary Arvind Mayaram has said there "could be possible violations"
by entities like " auditors failing in due diligence". The team was
set up by Finance Minister P Chidambaram in August.
The panel, which submitted its recommendations on September 20, also
said action needed to be initiated over "failure to furnish true and
fair view of the state of affairs at NSEL in its balance sheet for the
financial year ended March 31, 2013".
Deloitte Haskins and Sells, the statutory auditor of FTIL, has asked
stakeholders not to rely on the accounts it had earlier certified as "
true and fair". On September 21, a day after the report was submitted,
Mukesh P Shah & Co, the auditor of NSEL, informed the company that the
accounts of FY13 could not be relied upon. When Deloitte came to know
about this, it informed FTIL that the parent accounts of FY13 also
could not be relied upon.
On September 24, a day before the scheduled annual general meeting,
FTIL informed the exchanges that Deloitte had informed that the
accounts it certified could no longer be depended upon. FTIL had to
withdraw certain resolutions, related to the approval of accounts and
reappointment of Deloitte as auditor from the annual general meeting
held on September 25.
A source close to Deloitte, however, said though the audit firm was
not aware of any adverse remarks by the Mayaram committee, it did not
have any option but to withdraw reliance, following the action taken
by the auditor of NSEL. A Deloitte spokesperson refused to comment.
The STS has referred the violation of company law provisions under
Section 211, 217 and 542 for investigation by the Serious Fraud
Investigation Office ( SFIO).
"The investigation can also be started by SFIO on the basis of
reference received from the Department of Company Affairs," the report
said.
While Section 211 deals with failure to present a true and fair view
of the state of affairs in the balance sheet, Section 217 deals with a
similar violation in the board's report attached to the balance sheet.
Section 542 deals with " carrying on the business with intent to
defraud any person or for any fraudulent purpose".
BELATED DAMAGE CONTROL
May 2013: Deloitte audits and certifies FTILs accounts July 31: NSEL
suspension of contracts, payment crisis erupts July 31- September 20:
No action by auditors September 20: Mayaram panel submits report
damning auditors September 21: NSEL auditor withdraws reliance on FY13
balance sheet September 23: Deloitte withdraws reliance on FTIL's FY13
accounts September 24: Exchanges informed about Deloitte withdrawal
Source: Exchange filings, news reports
SC's PET verdict makes industry cheer, green activists scream
INDUSTRY'S PET
SHINE JACOB
New Delhi, 26 October
The Supreme Court's decision on Friday to quash a plea against a
Madhya Pradesh High Court order, and thereby deny a ban on
Polyethylene Terephthalate ( PET) packaging, has come as a relief to
the ₹ 4,000- crore PET industry.
But, this has also left green activists concerned over the likely
environmental damage and harmful effects of chemicals in PET — a
polymer resin of the polyester family — getting exposed to reactions
with the medicines and liquor contained in the bottle. The country's
soft drink market is the primary driver for PET bottles.
In volume terms, 62- 65 per cent of soft drinks now come in PET
bottles, making it a more vital component of the booming soft drink
market. The other major user industries include pharmaceuticals,
drinking water, edible oil, milk, spices, honey, ketchup, pickles and
confectioneries.
In June 2013, the Madhya Pradesh High Court had dismissed apublic
interest suit filed by Prani Mitra Samiti ( Pramisha), a
nongovernmental organisation, asking for a ban on the use of PET for
packaging of beverages. When asked about this, B V Ramanan, chairman
and managing director of Livia Polymer Bottles, a leading PET
manufacturer, said: "According to the Food Safety Act, PET packaging
has been approved by the Bureau of Indian Standards (BIS) for the past
26 years. This ruling would be a boost for the country's PET industry,
growing at 15- 18 per cent annual rate for the past two years." Also,
the PET raw material industry is planning to expand its capacity to
three million tonnes, from the current 1.2 million tonnes. "Of the 1.2
million tonnes of raw materials produced, 60,000 tonnes are consumed
by the domestic industry, while the rest is exported," said an
industry source.
Though similar PILs were filed in Andhra Pradesh, Uttar Pradesh,
Punjab and Haryana and Karnataka, too, citing PET contaminated
beverages and caused environmental hazard, all these pleas were turned
down by several courts.
Asked about this, Ramesh Chauhan, chairman & managing director of
Bisleri International, the largest consumer of PET bottles for
packaging water, said: " At last, somebody up there understands the
value of PET packaging and is not getting misled by false propaganda."
He added PET and plastics were the only packaging materials that had
made a unique value system for themselves — these can be recycled more
than once which ensures the ecosystem is kept free from nuisance. " I
am happy people are waking up to the facts the industry was trying
hard to express for a long time," Chauhan said.
Environmentalists, however, are countering the industry. "Scientific
studies by independent groups suggest chemicals elements in PET
bottles might react with chemical components in drugs and cause
leaching in various temperature conditions. These companies might have
BIS and other regulatory clearances but our demand is that the
government consider this on the basis of fresh studies," said Ajay
Jugran of HIM Jagriti, Uttaranchal Welfare Society, Dehradun. HIM
Jagriti had recently approached the health ministry, seeking a ban on
PET packaging for medicines, as leaching could have carcinogenic
impact.
Now, the health ministry has also jumped into the picture and is
planning to set up an expert committee to look into the issue
scientifically.
On Friday, a two- member Bench of Chief Justice P Sadashivam and judge
Ranjan Gogoi had rejected a special leave petition based on the order
passed by the Madhya Pradesh High Court.
₹ 4,000 crore: Size of India's polyethylene terephthalate ( PET)
packaging industry; it has a volume of 600,000 tonnes, compared with
China's 4 millon tonnes Users: Major user industries include soft
drinks, pharma products, drinking water, edible oil, milk, spices,
honey, ketchup, pickles and confectioneries 62- 65% of soft drinks
come in PET bottles ( in volume terms) 15- 18%: Annual rate at which
India's PET industry has been growing for the past two years (
estimated to fall to 12% this year due to early rains dampening sales
in North India)
--
CS A Rengarajan
9381011200
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