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Home / Market / Stock-market-news /  Further delay likely in final decision on NSEL-FTIL merger

Mumbai: A final decision on the proposed merger between scam-hit National Spot Exchange Ltd (NSEL) and its parent Financial Technologies (India) Ltd (FTIL) is likely to be further delayed.

The ministry of corporate affairs (MCA) had granted personal hearing to both FTIL and NSEL next week. But while NSEL will present its case as per schedule, FTIL’s hearing has been postponed by four weeks.

The reason for postponement was not immediately clear.

A spokesperson for FTIL said over the phone that a hearing at MCA was scheduled next week but has been postponed by four weeks. An NSEL spokesperson said the hearing will happen next week as per schedule.

The government on 21 October issued a draft order for the merger of the two entities. In the order, the government said it proposed to do so in public interest, forcing FTIL to assume all the liabilities of the commodities bourse and also made it a party to all the contracts and agreements entered into by NSEL.

FTIL owns 99.99% of NSEL, on which trading was suspended after the 5,574.35 crore fraud came to light in July 2013.

On 4 February, the Bombay high court directed that the interested parties could file objections against the draft order with MCA within 30 days and, thereafter, the government should pass an order within four weeks after hearing all the parties. The high court had also said the order passed by the government will not be notified for a period of two weeks so that the aggrieved parties can seek legal recourse.

Meanwhile, in response to an application filed in April by an NSEL investor under the Right to Information Act (RTI), MCA had replied on 11 May that it had filed an application with the Bombay high court, seeking time till 31 July to pass an order and the court approved it on 24 April.

The ministry, in its reply to the RTI query, said it sought additional time as more than 19,000 communications, including emails and physical letters, were received by the ministry that contained suggestions and objections against the merger from firms, shareholders, creditors and employees. Mint has a copy of the response and the application that sought to inspect the 19,000 communications received by the ministry.

“There are over 19,000 email/manual letters on objections and suggestions raising various matters of law ranging from the constitutional validity of Section 396 of the Companies Act, 1956, separate legal entity concept, whether public interest is involved, liability of holding firm besides various matters of fact. It is very difficult to tabulate the objections and suggestions into various categories and their interpolation and exploration to analyse, prepare for hearing and deal with the same in the final order," says MCA’s RTI response.

The merger is being proposed under Section 396 of the Companies Act. 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.

FTIL has already opposed the merger proposal. In a letter to the exchanges in September, FTIL said under the Companies Act, the government can merge two firms only if such a union is essential in public interest.

“The interest of the 13,000 clients of brokers who traded on 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.

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