SC allows FTIL to use funds for day-to-day operations

The Supreme Court restricted FTIL from creating any third-party rights or disposing of any assets

The Supreme Court (SC) on Monday modified the order of the Madras High Court, which had partly allowed Financial Technologies (India) Ltd or FTIL to use its assets.  SC allowed FTIL to use funds for its day-to-day functions and wages. It asked the Company Law Board (CLB, a quasi-judicial body), where the dispute between the firm and the government is pending, to speed up its disposal.  

Last year, the corporate affairs ministry had asked CLB to allow government nominees to replace existing directors to prevent alleged fraud and breach of trust following a Rs 5,600-crore scam.  It wanted FTIL to merge with National Spot Exchange Ltd (NSEL).     

In an interim order, CLB had directed the firm not to alienate its assets or create third-party rights. The Madras High Court partly modified the curb and restricted the bar only to immovable property.

The government asked SC to restore the CLB order. Solicitor General Ranjit Kumar said the government wanted to protect investors and FTIL should not create any third-party interest through any transaction in assets and investments.

Opposing the government's appeal, counsel for the firm A M Singhvi and Amit Sibal argued the CLB order had crippled FTIL's functioning. The company dealt with software licensing only. It was now not able to carry out its day-to-day functions because of the curbs, the counsel argued.

SC allowed use of funds for normal business activity.  But no third-party rights should be created, it said. CLB will hear the case on May 6. It will deal with the main issues raised by the company and the government.  

FTIL on Monday said it had been temporarily restrained from disposing its assets or creating third-party rights. "SC has not expressed any view on the merits of the matter. The CLB will decide the issue of whether this restraint should continue or not on May 6. FTIL can continue its day-to-day operations," FTIL said.

SC was surprised that the Madras High Court had intervened on an interim order of the CLB. Lawyers told the court that certain aspects of the case were also before the Bombay High Court, where FTIL had challenged the government proposal to merge NSEL with it. The high court had reportedly stayed the merger in an interim order.

The government approached CLB after the alleged payment fraud came to light in July 2013 at NSEL, in which FTIL held a 99 per cent stake.