Home / Politics / Policy /  Bombay high court restrains FTIL from distributing dividend

Mumbai: The Bombay high court on Wednesday barred Financial Technologies India Ltd (FTIL) from distributing a dividend to its shareholders till the time the court decides on a petition filed by a group of investors who lost money in the Rs5,574 crore settlement fraud at the National Spot Exchange Ltd (NSEL).

Hearing the petition filed by three entities – LJ Tanna Shares and Securities Pvt. Ltd, IGL Finance Ltd and Remi Sales & Engineering Ltd – justice S.J. Kathawalla said the company can go ahead with its scheduled annual general meeting (AGM) on Wednesday but cannot distribute the dividend till the matter is disposed by the court.

The case will be heard on 5 October.

FTIL holds 99.99% of NSEL.

“The court has granted an interim relief. As per the interim relief, the company can go ahead with its AGM and also pass the resolution regarding final dividend but it cannot distribute the dividend till the court decides on the matter," said Bhushan Shah, solicitor, Mansukhlal Hiralal and Co., the law firm representing the petitioners who collectively have lost nearly Rs165 crore in the NSEL scam.

FTIL’s AGM is scheduled on Wednesday in Chennai. The meeting’s agenda includes declaring a final dividend for the financial year 2014-15, according to a stock exchange notification.

On 9 August, FTIL announced a standalone loss of Rs34.15 crore for the quarter ended 30 June while announcing a dividend of Rs5 per share that will lead to a payment of almost Rs10 crore to the promoters who collectively hold a 45.63% stake in the company.

The promoters of FTIL include Jignesh Shah and his family members, and La-Fin Financial Services Pvt. Ltd, which is Shah’s investment company.

He spent more than 100 days in jail in connection with the fraud at NSEL before being granted bail on 22August 2014.

Investor associations have been voicing their concern against FTIL to the government and regulatory agencies, saying that the move by the company’s board amounts to asset stripping at a time when the courts have barred FTIL from selling any immovable assets.

The company is allowed to go ahead with the sale of its movable assets, including its stakes in other entities, although such transactions are subject to regulatory approvals.

Investors are concerned about the cash outgo also because of the proposed merger of NSEL with FTIL, which will force the listed entity to assume all liabilities of the commodities bourse. The Bombay high court has directed the government to decide on the merger by 30 October.

An FTIL spokesperson did not immediately respond to an e-mail seeking comments on the court ruling.

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