The Government’s draft order directing the merger of National Spot Exchange Ltd (NSEL) with Financial Technologies is one of its kind, as this is the first instance involving two private sector companies.

Both NSEL and FTIL belong to one group in the private sector.

This is the first time that a listed entity in the private sector is involved in a Section 396 order of the Central Government, according to S Balasubramanian, former Chairman of the Company Law Board.

“Normally, the Central Government resorts to Section 396 (of the Companies Act, 1956) order to save a company (in distress) or in national interest. The draft order in the latest move is under national interest,” Balasubramanian told BusinessLine .

Unlike Satyam

He also said the latest Section 396 draft order cannot be compared with Satyam Computers case, which was a judicial order by CLB and no merger was involved.

“Satyam was a case where the company’s shares were acquired by a subsidiary company of Mahindra Group. It was not a merger,” Balasubramanian clarified.

So far, on four instances the Centre has invoked Section 396 in the past three decades. They were: Hatti Gold Mines, Chitradurga Copper with Karnataka Copper Consortium Ltd (in 1985); Chandpur Sugar Company with UP State Sugar Corporation Ltd (July 1989); Internal Aluminium Products with National Aluminium Company (2000); and Air India-Indian Airlines merger (2007).

In the Nalco case, it was both the companies that approached the Central Government seeking a merger under Section 396.

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