Trouble-ridden Financial Technologies has ruled out the possibility of merging its subsidiary scam-tainted NSEL with itself as suggested by the Forward Markets Commission.

Irreparable damage

The suggestion by FMC will irreparably prejudice and harm FTIL and over 60,000 stakeholders besides unsettling over 1,000 employees, lenders and other stakeholders, said FTIL in a statement on Tuesday.

FMC has recommended to the Government to consider merger of both the companies for faster recovery of ₹5,300 crore dues from defaulters. To resolve the issue at the earliest, FMC has also suggested the Centre consider taking over the management of FTIL. Both Ministries — Corporate Affairs and Finance — are studying the feasibility of implementing the FMC’s proposals.

“The Commission, vide its letter dated August 18, has recommended to the Ministry of Corporate Affairs to consider the amalgamation of NSEL with FTIL in public interest so that the human and financial resources of FTIL are also directed towards facilitating speedy recovery of dues from the defaulters at NSEL,” FMC said in its latest report.

Responding to the proposal, FTIL said under the Companies Act two companies can be merged only in public interest. The interest of the 13,000 clients of the brokers who traded on NSEL platform for higher returns cannot be termed as ‘public interest’. The Bombay High Court has also questioned whether these trading clients are genuine investors, it said.

“Should over 60,000 public shareholders of FTIL suffer a non-existent liability of ₹5,500 crore by the forced merger when the very existence of any legal liability on NSEL and consequently on FTIL is sub judice,” asked FTIL.

Investigations by the Economic Offences Wing have revealed that the entire outstanding dues of the trading clients are with the 24 defaulters. No trail of trading clients’ money has been traced either to NSEL or FTIL as observed by the Bombay High Court.

Moreover, it said, the interests of trading clients are protected by the Courts and investigative authorities. Instead of merging NSEL with FTIL, the real solution lies with the trading clients, brokers and the Government agencies joining hands with NSEL to ensure recovery of money from the 24 defaulters, specially when 85 per cent of the money rests in the hands of only seven defaulters, said FTIL.

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