Corporate affairs ministry last year ordered the NSEL's merger with parent firm FTIL, but that has been challenged by the exchange and the matter is now before the Bombay high court
New Delhi: Opposing the proposal to merge it with Financial Technologies (India) Ltd (FTIL), the crisis-hit National Spot Exchange Ltd (NSEL) on Thursday said it has made a detailed representation to the government stating that the merger would hamper the recovery of ₹ 5,600 crore from defaulting members. In the wake of the payment crisis, the corporate affairs ministry last year ordered the merger of NSEL with its parent firm FTIL but that has been challenged by the exchange and the matter is now before the Bombay high court.
“We made an oral representation to the corporate affairs ministry officials on Wednesday where we stated our objections to the proposed merger, which is bad in intent, bad in law and will have bad consequences," NSEL managing director and chief executive officer Prakash Chaturvedi said. The merged entity would not have “any interest and the same urgency" as is there now in recovering the money and defaulters would have an “easy time", he noted.
FTIL owns little over 99% stake in NSEL, which is non-operational now. The ministry issued a draft order for merger in October 2014 and the final order is expected soon. “It appears that the merger is bad in intent and the objective is to raid the treasury of FTIL and distribute the money to investors," Chaturvedi said. He also said that the ministry and the then commodities market regulator Forward Markets Commission (FMC) did not conduct any independent probe into the alleged misdoings at the exchange before proposing the “forced merger".
“We (NSEL) have been victimised," Chaturvedi said, adding that there are 24 defaulters but “no action" has been taken against them. Following a recommendation from the FMC, the ministry last year issued a draft order for merging NSEL with FTIL. The proposed merger—possibly the first major government intervention in a scam-hit private sector entity since the Satyam case in 2009—would take a final shape after taking into account submissions or objections by various stakeholders.
Pursuant to the merger, FTIL Group would need to absorb NSEL along with all its liabilities including payments due to be paid to brokers, investors and others. When asked about the recovery of defaulted payments worth ₹ 5,600 crore, Chaturvedi said that about ₹ 570 crore has already been paid to investors. Besides, the court has allowed properties worth about ₹ 1,225 crore to be liquidated towards repayment to about 13,000 investors.
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