Bombay HC orders status quo on NSEL-FTIL merger
According to the court, the issue of application of section 396 of the Companies Act, 1956, in the matter needs to be looked into
Mumbai: The Bombay high court has directed the government to maintain status quo on the draft order related to the merger of National Spot Exchange Ltd (NSEL) with Financial Technologies (India) Ltd (FTIL) till the court hears the matter on 22 December.
According to the court, the issue of application of section 396 of the Companies Act, 1956, in the matter needs to be looked into.
“We need to see whether two private companies can be directed to merge without consent. This requires consideration," said justice V.M. Kanade.
Appearing on behalf of FTIL, senior advocate Abhishek Manu Singhvi argued that never before has section 396 of Companies Act, 1956, been used to merge private companies without consent.
“This is an extraordinary matter. It (section 396) has been used a maximum of four times and that too for the consensual merger of government companies," he argued, while questioning the power of the government in issuing the draft order.
On 21 October, the government had issued a draft order suggesting that FTIL be merged with NSEL in public interest. The merger would mean that FTIL would assume all the liabilities of the commodity bourse and become party to all the contracts and agreements entered into by NSEL. The government said the order would be finalized after comments and feedback from stakeholders and the public.
FTIL owns 99.99% in NSEL, on which trading was suspended after a ₹ 5,574.35 crore fraud came to light in July 2013.
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