BackNSEL-FTIL merger: Govt wants time till 31 December to pass final order
Bombay high court had set a deadline of 30 October for the order
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Mumbai: The ministry of corporate affairs (MCA) has filed an affidavit in the Bombay high court seeking time till 31 December for passing the final order on the merger of the National Spot Exchange of India Ltd (NSEL) with Financial Technologies India Ltd (FTIL). The court had set a deadline of 30 October for the final order.
A bench comprising justices S.C. Dharmadhikari and B.P. Colabawalla will hear the government’s plea on Friday.
The government, in its affidavit, has stated that it is not possible to pass the order within the deadline as FTIL and NSEL have submitted “voluminous documents" that will take time to be considered before a final order is passed.
The government said that both FTIL and NSEL insisted on inspection of certain original documents that further delayed the process as the documents were in the custody of investigating agencies.
“...Respondent No. 1 (MCA) has very limited time available with it to examine and consider the representations submitted by the petitioner (FTIL) and NSEL. The Applicant/Respondent No. 1 has made every effort to comply with the time lines prescribed by this court. However, a delay has been caused due to the insistence by the Petitioner/NSEL for inspection of original documents which were not in the custody of Respondent No. 1. Further, after the hearings, the Petitioner/NSEL have submitted voluminous documents which will need to be considered by Respondent No. 1. As a result of these factors, Respondent No. 1 has insufficient time to pass its final order by 30 October 2015," the affidavit said.
On 7 August, the high court had directed the government to pass the final order by 30 October while stating that “no further extension will be granted".
In the draft order issued on 21 October 2014, the government said it proposed to merge the two entities in public interest, forcing FTIL to assume all the liabilities of the commodities bourse and also making it a party to all the contracts and agreements entered into by NSEL.
FTIL owns 99.99% of NSEL, on which trading was suspended on 31 July 2013 after the detection of a ₹ 5,574 crore payments crisis, which later turned out to be a case of fraud.
FTIL, promoted by entrepreneur Jignesh Shah, filed the petition in the Bombay high court challenging the constitutional validity of Section 396 of the Companies Act, 1956, under which the government proposed to merge the two entities in public interest.
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. FMC has now been merged with the Securities and Exchange Board of India (Sebi).
In a letter to the stock exchanges in September last year, FTIL said that under the Companies Act, the government can merge two companies only if such a union is essential in public interest. “The interest of the 13,000 clients of the brokers who traded on the NSEL platform for higher returns cannot be termed as public interest when 66% of the entire outstanding amount is being claimed by just 6% of the trading clients," FTIL said in its letter.
FTIL also appealed to all its shareholders to file their objections to the draft order with the MCA. The government, however, has submitted in court that the objections are an attempt to stall the passing of a final order.
Spokespersons of FTIL and NSEL did not immediately respond to e-mail queries seeking a comment on the government’s affidavit.
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