Mumbai: The Bombay high court on Monday dismissed a plea filed by 63 Moons Technologies Ltd or Financial Technologies India Ltd (FTIL) opposing the merger with its unit National Spot Exchange Ltd (NSEL), thereby giving a green signal to the merger of the two.
FTIL, however, in a statement said that it will challenge the high court 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 a 63 Moons Technologies spokesperson in an e-mailed statement.
The ministry of corporate affairs (MCA) on 12 February 2016 had ordered a merger between FTIL and NSEL making FTIL responsible for the liabilities of the fraud-hit commodities bourse. It’s the first time that the government had forced a merger between two private entities, using a provision of the Companies Act that allows it do so in public interest.
Controlled by entrepreneur Jignesh Shah, FTIL owns 99.99% of NSEL, on which trading was suspended after a Rs5,574.35 crore fraud at the latter came to light in July 2013.
As the merger order has now been upheld by the Bombay high court means that the outstanding liabilities of NSEL, which currently stand at Rs5,269 crore (after some repayments to small investors), will be absorbed by parent company FTIL.
The merger was first recommended by the commodities market regulator Forward Markets Commission (FMC) and has also been demanded by investors affected by the fraud at NSEL. FMC has now been merged with the Securities and Exchange Board of India (Sebi).
The MCA directive in February 2016 was after a draft order issued on 21 October 2014, wherein the government proposed to merge the two entities in public interest, forcing FTIL to assume all the liabilities of NSEL and also making it a party to all contracts and agreements entered into by NSEL.
FTIL had challenged the constitutional validity of Section 396 of the Companies Act, 1956, under which the government proposed to merge the two entities in public interest.
The interest of the 13,000 clients of the brokers who traded on the NSEL platform for higher returns cannot be termed as public interest when 66% of the entire outstanding amount is being claimed by just 6% of the trading clients, FTIL had argued.
NSEL investors have been pushing for a merger between the two entities and want FTIL to assume the liabilities of NSEL.