The government may soon pass a final order on the merger of the National Spot Exchange Ltd (NSEL) with its parent company Financial Technologies Ltd (FTIL) for effective recovery of money lost by investors in the Rs 5,600 crore NSEL scam.
The government may soon pass a final order on the merger of the National Spot Exchange Ltd (NSEL) with its parent company Financial Technologies Ltd (FTIL) for effective recovery of money lost by investors in the Rs 5,600 crore NSEL scam.
"The Ministry of Corporate Affairs can order the merger by applying section 396 of the Companies Act, 1956, which enables the government to merge two entities in public interest," said a government official, who wished to remain anonymous.
This would mean FTIL assuming all the liabilities of the commodity bourse and become party to all agreements entered into by NSEL. FTIL owns 99.99% of NSEL on which trading was suspended after the fraud came to light in July 2013.
Last week, Bombay High Court vacated the status quo it had placed on a government draft order for a merger of the NSEL and FTIL, allowing the government to proceed with passing a final order.
However, the Bombay HC has given FTIL the option to challenge the order.
"The government will hear all parties and their contentions within 30 days and pass an order within four weeks of the hearing," said Justice VM Kanade, ruling for the bench.
Kanade also said the government's final order will be kept in abeyance till the court hears the case.
Meanwhile, FTIL has begun appealing to its shareholders to oppose the merger decision.
FTIL chairman Venkat Chary said in a letter sent to BSE, in February, 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".
On October 21, the government issued a draft order suggesting that FTIL be merged with NSEL in public interest. The merger was recommended by the Forward Markets Commission (FMC).
FTIL challenged the move in the Bombay High Court, which ordered the status quo on the draft order until the final hearing of the case.
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