The Bombay High Court on Monday dismissed an appeal filed by Jignesh Shah-owned 63 Moons Technologies, formerly Financial Technologies India (FTIL), opposing the merger with subsidiary National Spot Exchange (NSEL).

The central government had ordered the merger of FTIL, which owns 99.99 per cent of NSEL, and its scam-hit subsidiary NSEL last February. Trading in the commodities spot exchange was suspended after a Rs 5,500-crore fraud was unearthed in July 2013.

Meanwhile, FTIL, in a statement, said it will move the Supreme Court against the order. “The Honourable Bombay High Court has dismissed our writ petition. However, it has granted 12-week stay on the operation of the merger order. We will be moving the Supreme Court during this 12-week period. We have full faith in the judiciary and continue to believe that ultimately the truth and justice shall prevail, ” said 63 Moons in an e-mailed statement.

Stocks of 63 Moons on Monday hit the 5 per cent lower circuit at Rs 131.10 on the BSE after the HC order.

The ministry of corporate affairs (MCA) on February 12, 2016 had ordered a merger of the two entities in public interest after a demand by investors hit by the fraud at NSEL and also based on the recommendation of erstwhile commodities market regulator Forward Markets Commission.

FTIL, which would be forced to take all the liabilities of its scam-hit arm, vehemently opposed the forced merger.

A bench headed by Chief Justice Manjula Chellur admitted the government’s submissions that the merger was in public interest.

Venkat Chary, chairman, 63 Moons Technologies, said in a statement that the Bombay High Court’s upholding of the merger order of NSEL with 63 Moons, passed by the ministry of corporate affairs through an executive fiat, is “devastating for corporate India.”

Terming it as a Black Day in the history of Corporate India, Chary said, “this order has a serious impact on the limited liability concept that is the corner stone of the Indian corporate sector, by lifting the corporate veil by an executive order and without running a full evidence-led adjudication.”

“This is a worrisome development for corporate India as the aftermath is likely to be chaotic, impacting investment flow into India by way of domestic investments, FDIs, FIIs and also the spirit of entrepreneurship, so vital for the country’s economic development as investors will always be scared to invest in parent companies with subsidiary companies,” Chary said in an email statement.

“Even in the case of consensual merger of two government companies, the principle of natural justice, constitutional validity and stake holder voting (which are shareholders, creditors and employees) are taken into account; while in this case, where two private companies are involved, the rule book seems to have been thrown away by the MCA and shareholder compensation is also ignored. This will have a devastating impact on the Company Law and its foundations. This situation will result in a serious loss of confidence and of investment, and will raise questions as to whether we are really ruled by the company law and limited liability principles,” he said.

FTIL had questioned the constitutional validity of Section 396 of the Companies Act, 1956, under which the government proposed to merge the two entities in public interest. This is the first time the government has ordered a forced merger of corporate entities in public interest.

The investor association, NSEL Aggrieved And Recovery Association (NAARA), welcomed the high court decision, saying that “the judgement is a big ray of hope for all aggrieved investors. We expect the government to now push for conclusion of proceedings at NCLT in the matter of supersession of FTIL board, besides thwarting all further nefarious attempts of FTIL in this matter.”