The Bombay High Court has vacated its stay order on the proposed merger of the scam-ridden National Spot Exchange with Financial Technologies (FTIL) and has allowed the Centre to take a decision within eight weeks.
The court said that FTIL could file a legal appeal within two weeks of the Government’s final decision in case it is aggrieved.
The Centre had proposed to merge both entities under Section 396 of the Companies Act. FTIL had opposed this and had filed an appeal challenging the Centre’s proposal.
Hearing a response from the Corporate Affairs Ministry on Wednesday, Justices VM Kanade and Revati Mohite Dere said the Government would seek public comments on the proposed merger for four weeks and thereafter conduct public hearings on the issue for two weeks. It has to take a decision within two weeks after that.
Usually, a decision taken by the Centre to merge two entities under Section 396 cannot be appealed in a Court of Law. However, in order to protect FTIL’s interests, the High Court has directed the Centre not to notify its decision on this issue without giving FTIL an opportunity to appeal in the Court.
‘Lift status quo’ Appearing on behalf of the Government, Solicitor General Ranjit Kumar argued that the Court should lift the status quo order so that the Centre could process the draft order and that FTIL along with all the interested parties could make their submission before a final order is passed.
“It is not fair on FTIL to conclude that the Government has already decided to merge the two entities,” he said.
‘Restrain FTIL’ Pointing to a BSE filing by FTIL on a stake sale in Bourse Africa and the hiving off of its automated trading software Odin “into a separate business unit” for the purpose of “selling it to prospective bidders”, Kumar asked the Court to restrain FTIL from selling its assets and making it a shell company in order to nullify the purpose of the merger.
Abhishek Manu Singhvi, FTIL counsel, said the company has only initiated the process of sale due to compulsion by regulators, who have directed to it sell these assets.
“The draft order on the merger is based on the not ‘fit and proper’ ruling, which itself is valid for three years and has been contested in the Court,” he said.
Last October, the Centre had passed a draft order to merge NSEL with FTIL in order to protect the interest of 13,000 investors who have lost about ₹5,600 crore while trading on the NSEL platform.
FTIL had moved the Bombay High Court and obtained a status quo order twice, restraining the Government from taking a decision. On December 22, the Court extended the status quo on the draft merger order and directed the Government to file its response.