Forced merger of nsel ftil will corrode investors’ sureness

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FTIL & NSEL merger was recommended by the commodities market regulator FMC Without issuing final order MCA moved Co Law Board 2 supersede FTIL assailed Draft Order before Bombay High Court.

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Forced merger of nsel ftil will corrode investors’ sureness

  1. 1. Forced merger of NSEL-FTIL will corrode investors’ sureness
  2. 2. Contents • Introduction • What MCA Plan For FTIL-NSEL Merger? • So why is only FTIL being targeted under Sec 396? • Conclusion
  3. 3. Introduction • The National Spot Exchange (NSEL) Ltd alleged payment crisis of Rs 5,600 came to light on July 31, 2013. • When exchange suspended trading in all its contracts • NSEL proposed a payout plan on August 14, 2013, but the commodity spot exchange had not been able to make a single successful payout till date
  4. 4. What MCA Plan For FTIL-NSEL Merger? • On Oct 21, 2014, MCA proposed an amalgamation of NSEL and FTIL by invoking Sec 369 • FTIL & NSEL merger was recommended by the commodities market regulator FMC • This was done without issuing final order • MCA moved Co Law Board 2 supersede FTIL assailed Draft Order before Bombay High Court. • High Court has given Government time until 30, Oct’ 2015 to pass a final order on proposed amalgamation of NSEL Continue……
  5. 5. • Forced amalgamation of FTIL & NSEL will erode confidence of the investor community • MCA’s proposal to supersede FTIL Board is most likely to create choose in India’s corporate landscape. • Forced amalgamation on plea of “public interest” with room for ambiguities will drag down India’s rank NSEL • Prime minister’s Campaign “Make in India” will be adversely affected by forced amalgamation as it will destroy concept of ltd liability
  6. 6. SowhyisonlyFTILbeingtargetedunderSec396? • Section 396 of the Companies Act has never been used by the government to merge two companies and use assets of one company to pay for the liabilities of the other. • Forceful amalgamation of FTIL and FTIL constitutes expropriation of property rights of FTIL and its shareholders. • Prerequisite of “essential public interest” for exercise of power under Sec 396 is absent, as interests of 63,000 shareholders of FTIL have been ignored vis-a-vis (in relation to) the interests of the 13,000 trading clients of the NSEL • No private company Has even been forced to merger with another independent company. • Again, the forced amalgamation of two private sector companies is discriminatory and ignores the MCA’s own circular dated April 20, 2011. • Significantly, while hearing the case, the Bombay High Court has allowed the FMC to be a party to the case. • The High Court has also allowed the FTIL shareholders to be party to the case who unanimously (99.55%) voted against the amalgamation of the NSEL with the FTIL.
  7. 7. Conclusion • FMC had all the powers to take any action deemed appropriate against defaulters and brokers, but the FMC chairman turns a blind eye to them • FMC has always been chasing only FTIL • It is high time that FMC starts chasing other parties like brokers and also defaulters to whom the money trail has been traced to, instead of concentrating only on FTIL
  8. 8. Thank You

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