The curtains are finally down on a five-year-old case involving controversial payments made by Multi Commodity Exchange (MCX) to a London-based company, PESB, for developing a spot exchange software. Late on Monday evening, MCX disclosed to stock exchanges that it has taken a hit of ₹20.43 crore on the payments made to PESB after technology experts declared the product ‘useless’.

Business Line had reported on the controversial payments to PESB in 2019. The original ‘request for proposal’ (RFP) document, available with Business Line, shows inconsistencies and changes in the terms of the contract.

On Monday, MCX said, “A committee evaluated the [software] codes afresh and concluded that they cannot be used directly for any specific case of the exchange. Accordingly, the management has discontinued further development of this intangible asset under development, and consequently the entire expenditure of ₹2043 lakh has been impaired.”

Sharing the details of the failed deal, MCX said, “Company had entered into an agreement in August 2018 with a software vendor to develop a trading system for the spot market. As per the milestones, payments were made to the said software vendor from time to time. Company has incurred amount of 2,043 Iakh on the said project and was shown as intangible asset under development. On account of non-fulfilment of the scope of the project within the timelines and disputes arising between the parties, the board has constituted an empowered committee to evaluate the financial and technical aspects of the said system developed by the said vendors. The dispute was referred to Singapore International Arbitration Centre (“SIAC”). The company and the software vendor, have reached an amicable out-of-court resolution, which was confirmed by SIAC. Accordingly, the company has settled the dues and obtained the delivered codes and specification documents of the platform.”

Call for investigation

The deal and the write-off are likely to bring under scanner those who approved the payments, MCX sources said. Market regulator SEBI has been following the matter for five years and is likely to take it up after the disclosure, the sources said.

A whistleblower has filed a petition in the Madras High Court for an investigation into the deal. The petitioner, Manoj Sheth, has made MCX Chairman Saurabh Chandra, MD and CEO PS Reddy, and market regulator SEBI parties to the case. Notices have been served to the parties.

Board-level and audit committee discussions have also been held on why MCX paid the amount in advance to PESB, apart from an audit by ANB Systems. Usually, only part payments are made to software developers until the job is completed.