NSEL-FTIL Merger On The Anvil
NSEL-FTIL Merger On The Anvil
When it comes to reviving the crisis-ridden NSEL (National Spot Exchange), Finance Technologies India Ltd (FTIL) is the cure. The Modi government has announced that the debt ridden NSEL will now merge with its holding firm, FTIL.
The Ministry of Corporate Affairs has already issued a draft order for the merger. The draft order invokes Section 396 of the Companies Act for the merger. This draft order is important for another reason as well. This is the one and only time a listed entity in the private sector has involved the invocation of Section 396 of the Central Government.
The order comes after the Centre considered the proposal put forth by the Format Markets Commission and the Department of Economic Affairs. The order stated that “…it (the Government) is of the considered opinion that to leverage the combined assets, capital and reserves for efficient administration and satisfactory settlement of rights and liabilities of stakeholders and creditors of NSEL, it will be essential in the public interest to amalgamate NSEL with FTIL.”
NSEL was in news some months back for being involved in an INR 5,600 crore payment crisis with many investors being cheated of their money. FTIL has issued a note to the stock exchanges saying it has received the communication from the Government on the merger. The firm has also indicated that it is considering appropriate steps via its legal counsel. FTIL's shares fell by INR 169.65 following this news on the BSE.
FTIL and its nominee own 99.99% of the NSEL. All due processes will be followed during the merger, according to the Ministry. All members and creditors of the two companies have been approached in writing and their comments will be noted within the coming two months. The order also said the decision will come into force from the date of publication of the order in the official gazette.
The conclusions and observations made in the NSEL's inspection reports and the books of account of the FTIL were also taken into consideration by the Centre before taking this decision.
The inspection has revealed a non-compliance with provisions of the Companies Act. The inspection also showed that the management and affairs of the erring company had been controlled by FTIL. The FMC order has already declared Jignesh Shah, Joseph Massey and Shreekant Javalgekar unfit for any exchange.
The draft order of the Ministry of Corporate Affairs has also said that the FTIL has not offered any explanations regarding the steps taken to honour the commitment to the creditors, assuring risk-free trading for members and clients of the exchange.
