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The high court here on Thursday ordered status quo on the draft order from the Union ministry of corporate affairs for a merger of scam-hit National Spot Exchange (NSEL) with parent entity Financial Technologies (FTIL). The October 21 proposal of the ministry has been challenged by FTIL. The court asked the ministry to file its reply to the petition before the next hearing, scheduled for December 22.
NSEL investors, who want the merger, have sought the court’s permission to intervene in the case. FTIL counsel Abhishek Manu Singhvi argued the government issued the draft order under Section 396 of the Companies Act. This has been used only on four occasions in the past to merge government companies — it has never been used for forcible merger of any private companies.
Singhvi further argued that the board of directors of both the companies have to accept the merger and it also needs to be approved by the central government.
The proposed move was an attempt to speed the repayment to investors of Rs 5,600 crore, on which NSEL had defaulted in July last year. FTIL says it fears the default of its subsidiary will be transferred on its books, resulting in a negative implication for its shareholders. Judge V M Kanade said the draft order should remain as it is and the court would like to examine the issue.
The draft order was given after recommendations to do so by the commodity markets regulator and the department of economic affairs. The ministry had sought comments on the proposal.
