OPEN APP
Home >Companies >FTIL appeals to shareholders to oppose NSEL merger draft order

Mumbai: Financial Technologies India Ltd (FTIL) has appealed to its shareholders to oppose the government’s plan to merge the company with its unit National Spot Exchange Ltd (NSEL), hit by a 5,574.35 crore fraud in 2013.

In a letter sent to BSE, FTIL chairman Venkat Chary said that all shareholders are entitled to “object to the forced amalgamation of NSEL with your company (FTIL) by exercising your right of opposition under Section 396 of the Companies Act, 1956".

“We request you as a responsible owner of your company to send to MCA (ministry of corporate affairs), your genuine, bona fide and reasoned objections to the draft order," it added.

The letter also highlights the fact that it has 2,000 crore in cash, and debt of 475 crore.

On 21 October, the government issued a draft order suggesting that FTIL be merged with NSEL in public interest. The merger would mean FTIL would assume all the liabilities of the commodities exchange and become party to all the contracts and agreements entered into by NSEL.

The government has said the order would be finalized after it considers feedback from stakeholders and the public.

The merger of FTIL and NSEL has been proposed under Section 396 of the companies law, which empowers the government to order such a union when it is deemed to be in public interest.

This is the first time that the government has invoked the provision in a case involving non-state entities.

The merger was recommended by commodities market regulator Forward Markets Commission (FMC) and has also been demanded by investors affected by the fraud at NSEL.

After FTIL challenged the draft order in the Bombay high court, the court ruled that the government can first pass the final order and the aggrieved party can then challenge it legally.

Separately, the company has also challenged the FMC order that declared FTIL unfit to hold a stake in any exchange.

FTIL, in its letter to the shareholders, said the “forced amalgamation of NSEL with FTIL is without even seeking the consent of the stakeholders, including shareholders and creditors, of both the companies.

Four of FTIL’s creditors—Union Bank of India, Syndicate Bank, DBS Bank Ltd and Standard Chartered Plc—have also moved the Bombay high court, opposing the government’s decision to merge NSEL with FTIL.

The four banks, in their plea, said their dues should first be secured before assets of the company are utilized to pay off NSEL’s liabilities.

Apart from the lenders, Ravi and Bharat Sheth, who collectively own an 8.1% stake in FTIL, have also filed a writ petition challenging the draft order.

Supreme Court senior laywer H.P. Ranina said FTIL was only bringing to the shareholders’ notice that if they have any reservations about the proposed merger, they can make themselves heard by the authorities, who may consider the objections when they pass the final order.

This is a common practice in such cases, he said.

While the government has pushed for a merger citing public interest, FTIL vehemently opposed the plans in the Mumbai high court.

On 4 February, appearing on behalf of FTIL, senior lawyer Abhishek Manu Singhvi said 781 wealthy individuals had lost around 4,000 crore in the NSEL irregularities.

“A provision (section 396) has been used...for effective recovery of money. It is a compulsive coercive merger of two corporate entities. Merger by loading the liabilities by compulsion. What about the 63,000 shareholders of FTIL? These 781 people must be very, very special that such an extraordinary power has been invoked," said Singhvi.

FTIL owns 99.99% of NSEL, on which trading was suspended after a payment crisis—which later turned out to be a case of fraud—came to light in July 2013.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
My ReadsRedeem a Gift CardLogout