MMTC: In the news for all the wrong reasons

Published: April 12, 2016 - 18:54

Hardnews Bureau Delhi

The government has been tightening corporate governance guidelines in order to improve risk management in firms and protect investors’ interests. However, there are corporations, which have shown little improvement in response to such policy measures. Metals and Minerals Trading Corporation of India (MMTC Ltd), India’s largest foreign trade enterprise, is one such notable example. The company is often in the news for all the wrong reasons.

Its auditor has pointed out a glaring anomaly in MMTC’s reporting of financial results for the quarter ended December.

There was an obligation on MMTC to pay up Rs 831.15 crore in liabilities to a coal supplier given a ruling that was upheld by the Delhi High court. Instead of shelling out the money, the PSU filed a revision appeal against the judgment in a division bench of the Delhi High Court. However, pending finding disposal of the case by the court, MMTC did not make any provision for the liability in its results for the December quarter.

MMTC has also invited the displeasure of agencies like the Comptroller and Auditor General, Central Bureau of Investigation and Central Vigilance Commission for violation of guidelines laid down by the Department of Public Enterprises.In December 2013, CBI arrested Hyderabad-based MBS Jewellers' promoter Sukesh Gupta and a senior official of MMTC K Ravi Prasad for alleged irregularities in gold imports and default of payment of over Rs 200 crore. Cheques given by Sukesh Gupta to MMTC had bounced due to paucity of funds in his account, according to the FIR filed in the case.

In another case filed in 2012, CBI arrested two MMTC officials in a Rs 18 crore-scam and also seized 400 kg of gold from the premises of a private company alleged to have been favoured by MMTC officials.

The FIR alleged that during the financial year 2007-09, at Chennai and other places, S Gurusamy, former chief general manager of south zone, MMTC, Chennai Regional Office, V Gurumurthy, former general manager (Finance and Accounts), MMTC Ltd, and some unknown officials entered into a criminal conspiracy with Chennai-based Surana Corporation Ltd (SCL) to cheat MMTC in gold and silver trading.

The officials abused their official position by extending undue favours to Surana Corporation by intentionally omitting to debit and recover the difference in the exchange rate from the firm, thereby causing a loss to the tune of Rs18 crore, according to the FIR.   During that period, SCL used to import gold and silver under the Stand-by Letter of Credit (SLBC) scheme. It used to deposit the cost of bullion arrived on the basis of a “notional price and notional exchange rate” prevailing on the date of delivery of consignments. As per the system and procedure, SLBC transactions were routed through the online Bullion Trading System(BTS). However, the two officials along with others dispensed with the all-important BTS mode and made all transactions manually to allegedly favour SCL. The officials deliberately treated the provisional invoice as final. They showed the difference in cost (difference between the provisional and the final invoice) as a variation in the purchase rate. The officials manipulated the system and intentionally failed to reconcile the difference in exchange rate and to recover the premium and other accompanying costs, the FIR added. Interestingly, the officials also “covered up” the wrongful loss to MMTC by allegedly showing a debit balance of Rs 18 crore in favour of Foreign Vendors Account in their book of accounts. The gold seized from SCL included gold bars, gold coins, chains, rings, and bangles, brought into India without any valid documents.