In a first-of-its-kind order, the Centre has directed the merger of crisis-hit National Spot Exchange Ltd (NSEL) with its parent Financial Technologies.
A final order, confirming its draft order issued in October 2014, was passed by the Corporate Affairs Ministry on Friday.
The final order — which is likely to be challenged before Mumbai High Court in the next fortnight — is significant as it is the first case of the government ordering merger of two private sector companies (under Section 396 of Companies Act 1956).
The final order came a day after a high level meeting chaired by Economic Affairs Secretary Shaktikanta Das reviewed the steps taken to recover money in the ₹5,574-crore payment crisis that erupted at NSEL — part of Jignesh Shah-led FTIL group — in late 2013.
Reacting to the final order, Financial Technologies (India) Ltd (FTIL) said the final order is “highly disappointing” and it places the interest of trading clients higher than that of the shareholders of a listed company.
“The Ministry of Corporate Affairs has also chosen to ignore the thousands of representations made by the shareholders, its creditors and hundreds of employees of FTIL and NSEL,” FTIL said in a statement.
FTIL had challenged the draft order before the Mumbai High Court.
“The merger shall result into making NSEL and FTIL as one single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of the resulting company (FTIL). Adequate safeguards have been provided in the final order with regard to the litigations pending and devolving of liabilities and assets arising out of pending proceedings,” the final order said.