Financial Daily from THE HINDU group of publications
Friday, Aug 09, 2002
Money & Banking - NBFCs
Partners lost faith in Kale: Ferguson
MUMBAI, Aug 8
AUDIT firm A.F. Ferguson and Co (AFF) today said that all the partners of the firm had "lost faith'' in Mr Y.M. Kale after an internal inquiry threw light on a "number of issues relating to Mr Kale's past conduct''.
Mr Kale, who resigned from the firm on Wednesday amid speculation that the Tatas "got him out'', is the author of the controversial report on Tata Finance Ltd (TFL). The report, which was subsequently withdrawn by AFF, reportedly showed several top officials of the Tata group in damning light.
In a statement issued today, the audit firm denied media reports that the House of Tatas had coerced the firm into asking Mr Kale for his resignation. It also explained that the total income of the firm from assignments of the Tata group was Rs 2.5 crore last year, which was "an insignificant amount compared to AFF's gross annual fees''.
Explaining the sequence of events, AFF said, "The Chairman of Tata Finance Ltd met the Managing Partner of the firm on July 9 and subsequently again on July 10. At these meetings, he informed the Managing Partner that there were many inaccuracies in our Special Report (on TFL) dated April 24. He also stated that they had lost confidence in the partner-in-charge of this special assignment, Mr Y.M. Kale.''
According to the firm, the seriousness of the remarks prompted it to undertake an internal inquiry on Mr Kale through a series of meetings with senior partners and former partners of the firm.
"At these meetings, Mr Kale was also given the opportunity to present his views. On July 20, an emergency meeting of 14 senior and former partners was held and various matters were deliberated upon, and Mr Kale also presented his views. On August 5 and 6, emergency meetings were held again,'' the statement said.
Stressing "unequivocally'' that the firm "normally always stands by its partners'', the statement said, "it was the unanimous opinion of all partners present that they had lost faith in Mr Kale, and therefore, he should cease to be a partner of the firm''. AFF today issued an advertisement announcing Mr Kale's resignation from the firm with effect from August 7.
According to AFF, "in pursuance to good corporate governance we believe it was our duty in the special circumstances to withdraw our report for examination and review by a totally new independent team from within the firm to be headed by another senior partner. This team will examine and review all the data and information collected and in the light of this, produce a new report''.
Meanwhile, agency reports quoted Reserve Bank of India sources as saying that it has undertaken an inspection of the accounts of TFL, but it was of a "routine nature''. The RBI said the apex bank has no role to play in the controversy and "we are only carrying out an inspection to see that the NBFC is following the guidelines laid down by us''.
The Tata Finance board of directors met today and took note of the developments. A Tata group official, however, described the meeting as "routine''.
Mr Kirit Somaiya, BJP Member of Parliament and President of Investors' Grievances Forum (IGF), today demanded an investigation against the accused in the "Tata Finance fraud case''. Mr Somaiya said IGF has taken up the TFL issue with the Department of Company Affairs and the Securities and Exchange Board of India.
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