Govt seeks to restrain FTIL from selling assets

To protect the interest of investors in the nearly Rs 5,600-crore scam at NSEL, the government has moved the Supreme Court seeking a restrain on parent firm Financial Technologies to prevent possible "asset stripping".
The government, on February 12, had directed the merger of scam-hit National Spot Exchange Ltd (NSEL) with its parent Financial Technologies, in a first-ever order to merge the two private companies.
In the wake of Rs 5,600-crore payment crisis at NSEL, the Corporate Affairs Ministry had sought merger of the bourse with parent firm Financial Technologies (India) Ltd (FTIL) as well as replacement of existing FTIL management.

Sources said the ministry has now filed a Special Leave Petition (SLP) in the apex court against a Madras High Court order, as part of the efforts to prevent possible sale of assets by FTIL.
Soon after issuing the draft merger order on October 21, 2014, the ministry had moved the Company Law Board to replace the existing management of FTIL, debar the current and previous directors and other key managerial personnel from taking up positions in the future.
It had also sought barring the firm from selling any of its assets.

Subsequently, CLB issued an interim order in June 2015 that barred FTIL from selling or creating third party rights on its assets.

However, FTIL challenged CLB's order in the Madras High Court, which partially suspended the stay. The court restricted the debarment only to immovable properties of FTIL.
Sources said the SLP has been filed for restoration of the interim order passed by CLB while permitting FTIL to carry on with its normal business activities till the CLB decides on the plea to replace the company's management.
The SLP, filed in February, was cleared by the Supreme Court Registry late last month and is now awaiting hearing, sources added.
Meanwhile, another case is going in the Bombay High Court where FTIL has challenged the government's proposal to merge NSEL with the company.

"The merger shall result into making NSEL and FTIL as one
single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of the resulting company (FTIL).
"Adequate safeguards have been provided in the final order with regard to the litigations pending and devolving of liabilities and assets arising out of pending proceedings," the Ministry had said in its 47-page final order in February.
The amalgamation would be effected from March 31, 2015, for the accounting purposes, it had said.
When the final order was passed in February, FTIL had said it was "highly disappointing" and it would challenge the same.

This is also the first case of the government ordering merger of two private companies invoking a rarely used clause in the companies law.
The nearly Rs 5,574-crore payment crisis at NSEL -- part of Jignesh Shah-led FTIL group -- came to light in late 2013.