FTIL questions ‘forced’ merger with NSEL

Mumbai: The Centre cannot use a provision in law that allows mergers to forcibly amalgamate parent company with its wholly owned subsidiary in a manner that undermines the interest of shareholders of the parent company, said senior counsel Harish Salve, the counsel for FTIL, on Thursday.
Salve began arguments in a petition filed by Financial Technologies (FTIL), now known as 63 Moons Technologies, against a February 12, 2016 directive of the ministry of corporate affairs (MCA) that ordered merger of National Spot Exchange (NSEL) with it.The ministry directed the merger of NSEL with its listed promoter FTIL. Salve said the merger order undermines the interest of FTIL’s 63,000-plus shareholders. Jignesh Shah is the promoter of FTIL.
The ministry’s order came in the wake of a Rs 5,600-crore NSEL scam of 2013 affecting about 13,000 “investors” who are demanding that they be compensated for their losses. Salve said these were not “investors’’ but “traders’’ who dealt through brokers in highly regulated financial transactions and most who pumped in huge amounts cannot plead ignorance of by-laws and procedures and claim to be victims.
“The issue is whether the government can use legal provisions for a merger under section 396 of the Companies Act as a punitive measure merely because one is a subsidiary,’’ said Salve. He said the arguments are on the construct of the provision and its implementation. “It is meant only for mergers between two healthy companies…not to ask a parent company to pick up the tab of its wholly owned subsidiary,’’ said Salve who will continue his submissions on Friday before a bench headed by Chief Justice Manjula Chellur. He said none of the probes have established fraud or shown that money was received by the parent company.
The MCA had issued the final merger order even after 99% shareholders and 100% creditors of FTIL had opposed its draft merger order.
Shah plea againt arrest by ED
Jignesh Shah, promoter of FTIL, has filed a petition in the Bombay high court, seeking protective orders against a possible arrest by the Enforcement Directorate (ED). Shah’s petition, filed through legal firm Naik Naik & Company, was argued by senior counsel Amit Desai on Thursday. Desai said he apprehends that that ED is likely to arrest Shah without issuing a notice as required under the Criminal Procedure Code. Shah fears ED will arrest him in a case that stems from the one registered by CBI in 2014.