In a landmark judgment that put a halt to the forced merger between the now defunct NSEL and FT (named changed to 63Moons Technologies), the Supreme Court on Tuesday said “there is no interest of the general public” in the matter.
The court observed that the expressions used by the Central Government, erstwhile commodity market regulator FMC, “in relation to public interest have relation only to the businesses of the two companies that are sought to be amalgamated.”
The apex court said the only reason that remained for merger was contained in the FMC recommendation, which the court concluded was for “protection of private interest of a group of investors/traders, distinct from public interest.”
After the 2013 payment crises at NSEL, the FMC, under its then chairman Ramesh Abhishek, had first proposed merger of the spot commodity exchange with its parent company FT in ‘public interest’ so that dues amounting to ₹5,600 crore be paid to investors and traders of NSEL. The Finance Ministry exercised its powers under Section 396 of the Companies Act, which provide for amalgamation of companies in public interest, to force the merger.
According to the apex court, the FMC’s 2014 recommendation to effect the NSEL-FT merger spoke only of ‘private interest.’
“We have seen that these (FMC) recommendations are in the form of a letter dated August 18, 2014, in which the ‘business reality’ is the fact that dues of ₹5,600 crore have to be paid, and that NSEL does not have the wherewithal to do so. Thus, its parent company’s financial resources ought to be used to effect such payment.
“This ‘business reality’, therefore, speaks only of the private interest of the investors/traders who have been allegedly duped (which fact will only be established in suits filed by them in 2014), and nothing beyond (which would show some vestige of public interest),” Supreme Court judges RF Nariman and Vineet Saran said in their order.
The apex court further said “one would have expected a resuscitation or revival of the commodities exchange of NSEL, which could have been achieved by takeover of its management” and that “it is difficult to imagine that grave shattering of public confidence by the permanent shutting down of NSEL would be remedied only by facilitating the paying of dues to certain allegedly duped investors/traders, which fact will be proved or disproved in suits filed by them which are pending adjudication in the Bombay High Court.”
A Bombay High Court committee has received investor claims of only a few hundred crores so far. The Serious Fraud Investigation report said there could be bogus claims. The Income Tax Department has sent notices to several investors to check the claims.
It is difficult to imagine that grave shattering of public confidence by the permanent shutting down of NSEL would be remedied only by facilitating the paying of dues to certain allegedly duped investors/traders: Supreme Court