The government has ordered merger of scam hit National Spot Exchange Ltd (NSEL) with its parent Financial Technologies India Ltd (FTIL), confirming its draft order passed more than a year ago.
The merger will allow for the settlement of Rs.5,600 dues of the now defunct exchange. Out of this outstanding amount, NSEL has so far managed to distribute only Rs.304.50 crore up to September 10, 2013.
This is the first case of the government ordering merger of two private companies. According to Section 396 of the Companies Act, 1956, the central government can order merger of two companies if it is essential in the public interest. “The merger will result into making NSEL and FTIL as one single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of the resulting company (FTIL),“ a senior government official said. This will mean FTIL will have to meet the liabilities of NSEL. The order will only be implemented after two weeks as the Bombay High Court has allowed FTIL to make appeal against the order.
“As per High Court's earlier order, there is an automatic stay of two weeks on the operation of the Merger Order. We will challenge the Merger Order before the Bombay High Court at the earliest, and are confident that justice will be done,“ FTIL managing director Prashant Desai said, expressing disappointment with the order. “The said merger order has placed the interest of trading clients higher than that of the shareholders of a listed company. MCA has also chosen to ignore the thousands of representations made by the shareholders, its creditors and hundreds of employees of FTIL and NSEL,“ FTIL said in a statement
The draft order, passed in October l 2014, has been challenged by FTIL in the court. While considering the merger proposal, the central government took into account the findings of inspection of books of account of NSEL and FTIL. The government in its inspection had found non compliances of various provisions of the companies act. It was also observed that the management of affairs of NSEL was being controlled and directed by FTIL and its key management persons.
The merger will allow for the settlement of Rs.5,600 dues of the now defunct exchange. Out of this outstanding amount, NSEL has so far managed to distribute only Rs.304.50 crore up to September 10, 2013.
This is the first case of the government ordering merger of two private companies. According to Section 396 of the Companies Act, 1956, the central government can order merger of two companies if it is essential in the public interest. “The merger will result into making NSEL and FTIL as one single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of the resulting company (FTIL),“ a senior government official said. This will mean FTIL will have to meet the liabilities of NSEL. The order will only be implemented after two weeks as the Bombay High Court has allowed FTIL to make appeal against the order.
“As per High Court's earlier order, there is an automatic stay of two weeks on the operation of the Merger Order. We will challenge the Merger Order before the Bombay High Court at the earliest, and are confident that justice will be done,“ FTIL managing director Prashant Desai said, expressing disappointment with the order. “The said merger order has placed the interest of trading clients higher than that of the shareholders of a listed company. MCA has also chosen to ignore the thousands of representations made by the shareholders, its creditors and hundreds of employees of FTIL and NSEL,“ FTIL said in a statement
The draft order, passed in October l 2014, has been challenged by FTIL in the court. While considering the merger proposal, the central government took into account the findings of inspection of books of account of NSEL and FTIL. The government in its inspection had found non compliances of various provisions of the companies act. It was also observed that the management of affairs of NSEL was being controlled and directed by FTIL and its key management persons.
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