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In a major setback to Financial Technologies, the Bombay High Court dismissed its petition seeking to restrain the Ministry of Corporate Affairs from replacing its board with Government nominees by moving Company Law Board.
The Government’s petition with CLB will come up for hearing on Thursday in New Delhi.
Hearing the petition on Tuesday, Justice BR Gavai and Justice AS Gadkari said the proceedings initiated by Ministry of Corporate Affairs under different sections of the Companies Act to supersede the FTIL board are separate from the merger of the company with its subsidiary the National Spot Exchange.
“The CLB, a quasi judicial authority, should hear the contentions of all the parties and should take into considerations the diverse arguments presented in the case before passing a final order,” said Justice Gavai.
Speaking to BusinessLine , Jay K Bhatia, Senior Government Counsel said the Government is within its rights to invoke two different sections of the Law to amalgamate the company with its subsidiary and supersede the board of FTIL.
If the CLB order goes against FTIL, it can always be challenged in the High Court, he added.
On February 25, the Government moved the Company Law Board to supersede the FTIL board under Section 397, while the amalgamation of NSEL with FTIL under Section 396 was heard by the Bombay High Court.
On March 2, FTIL filed a petition in the Bombay High Court challenging the MCA decision to supersede the board by approaching the CLB. FTIL claimed that the Government has gone back on it promise given in the Court while seeking to vacate the stay on the process to merger NSEL with FTIL.
Janak Dwarkadas, Senior Counsel representing FTIL said the government is trying to supersede the company’s board so that it would not face any opposition while merging FTIL with NSEL under Section 396 of the Companies Act.
“The Government has already decided to make the draft order on merger as final order and does not want any opposition to it. Once the FTIL board is replaced with Government nominees there will be no question of any opposition to the merger,” he said.
The government in its petition before CLB has said the board of FTIL is trying to scuttle attempts made to carry out amalgamation of FTIL with NSEL. It also alleged that the company is trying to sell off its assets leaving very little to recover when the merger is implemented.
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