On Thursday morning, The Indian Express came up with a shocking revelation: In August, then finance secretary Rajiv Mehrishi wrote to Finance Minister Arun Jaitley, complaining the revenue department was blatantly trying to help National Spot Exchange Ltd (NSEL) promoter Jignesh Shah.
Mehrishi was quoted as writing the revenue department had come to Shah’s “rescue”, against the government’s effort to merge NSEL with its holding company, Financial Technologies (India) Ltd, or FTIL, also promoted by Shah. Investors, represented by various groups such as the NSEL Aggrieved and Recovery Association, the NSEL Investors Action Group and the NSEL Investors Forum say the merger might help in faster recovery of investments. Shah, FTIL and its shareholders are against this move.
The note and the timing of its leak, during the week when the Ministry of Corporate Affairs (MCA) is conducting a final brief hearing of FTIL’s objections ahead of an October 30 deadline set by courts to pass the final order, raises several questions.
Interestingly, both parties in the dispute seem to be working towards the same objective — not to let Jignesh Shah get away. At the least, they claim this is the case. Shah, who contends he was a victim of the Rs 5,600-crore scandal, which he ascribes to an employee fraud, might not be flattered to hear about the ‘presumed guilt’ with which bureaucrats are handling his case.
While Mehrishi is concerned Shah would get away if the merger isn’t carried out, the revenue department’s stand follows its view that the merger will allow Shah to get away. This view is, in turn, based on the advice of the Enforcement Directorate (ED), according to The Indian Express report.
It reads: “That note, approved by then Revenue Secretary Shaktikanta Das, argued the ED was of the view that the merger would help Jignesh Shah; hence, DCA (Department of Corporate Affairs) should not press ahead with the merger. The note also mentioned that the matter was sub judice in the Bombay High Court. An official involved in the revenue department note to DCA, said, ‘The ED had advised this because a merger might result in Jignesh Shah getting away’.”
If this was the ED’s view, it isn’t clear what course it intended to take to ensure he didn’t get away. Obviously, the ED knows more than what is in public domain. But, has it taken any action that would expedite the return of dues to thousands of investors?
The date of the revenue department note isn’t clear. As it says the matter was sub judice in the Bombay High court, it is likely to have preceded the court order on August 7. In that order, a bench of S C Dharmadikari and G S Kulkarni gave the government time until October 30 to pass a final order on the proposed NSEL-FTIL merger. The bench said it would hear the petition challenging the applicability of Section 396 of the Companies Act, on which the merger order was based, on November 19.
In a way, this order gives a clear mandate to the MCA to pass an order and leave the decision to the court. The revenue department’s internal note, whether it preceded this court order or not, might not hold much water. However, it has immense nuisance value. Mehrishi’s concerns seem very specific. The India Express report said, “The Department of Revenue note could cause “serious damage” to the government’s case, warned Mehrishi. For, there can be “little doubt,” he said, that Shah would procure a copy of it under the RTI Act and “will get a fillip to his case for not merging the entities on the ground that even the Ministry of Finance is opposing it.” Even the CBI could make it a part of its ongoing investigation, Mehrishi wrote.”
That sounds like a guidance note for Shah and his colleagues. The RTI application might well be on its way, in case it hasn’t reached already.
Anyway, if at all the fighting departments’ concerns were about Shah getting away, penning signed notes that could be leaked later was surely not a way of ensuring this. In fact, they seem to have achieved exactly the opposite, especially when Shah and his colleagues are clearly and openly leaving no stone unturned in stalling the merger.
For a government that prides itself on talking in one voice on critical issues, lack of consensus on “how not to let Jignesh Shah get away” could become a huge embarrassment. It has already become a hot issue on social media, with different sides asking different questions. Care should be taken to ensure that the story does not go from “how not” to “how”.
Mehrishi was quoted as writing the revenue department had come to Shah’s “rescue”, against the government’s effort to merge NSEL with its holding company, Financial Technologies (India) Ltd, or FTIL, also promoted by Shah. Investors, represented by various groups such as the NSEL Aggrieved and Recovery Association, the NSEL Investors Action Group and the NSEL Investors Forum say the merger might help in faster recovery of investments. Shah, FTIL and its shareholders are against this move.
The note and the timing of its leak, during the week when the Ministry of Corporate Affairs (MCA) is conducting a final brief hearing of FTIL’s objections ahead of an October 30 deadline set by courts to pass the final order, raises several questions.
Interestingly, both parties in the dispute seem to be working towards the same objective — not to let Jignesh Shah get away. At the least, they claim this is the case. Shah, who contends he was a victim of the Rs 5,600-crore scandal, which he ascribes to an employee fraud, might not be flattered to hear about the ‘presumed guilt’ with which bureaucrats are handling his case.
While Mehrishi is concerned Shah would get away if the merger isn’t carried out, the revenue department’s stand follows its view that the merger will allow Shah to get away. This view is, in turn, based on the advice of the Enforcement Directorate (ED), according to The Indian Express report.
It reads: “That note, approved by then Revenue Secretary Shaktikanta Das, argued the ED was of the view that the merger would help Jignesh Shah; hence, DCA (Department of Corporate Affairs) should not press ahead with the merger. The note also mentioned that the matter was sub judice in the Bombay High Court. An official involved in the revenue department note to DCA, said, ‘The ED had advised this because a merger might result in Jignesh Shah getting away’.”
TO MERGE OR NOT |
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If this was the ED’s view, it isn’t clear what course it intended to take to ensure he didn’t get away. Obviously, the ED knows more than what is in public domain. But, has it taken any action that would expedite the return of dues to thousands of investors?
The date of the revenue department note isn’t clear. As it says the matter was sub judice in the Bombay High court, it is likely to have preceded the court order on August 7. In that order, a bench of S C Dharmadikari and G S Kulkarni gave the government time until October 30 to pass a final order on the proposed NSEL-FTIL merger. The bench said it would hear the petition challenging the applicability of Section 396 of the Companies Act, on which the merger order was based, on November 19.
In a way, this order gives a clear mandate to the MCA to pass an order and leave the decision to the court. The revenue department’s internal note, whether it preceded this court order or not, might not hold much water. However, it has immense nuisance value. Mehrishi’s concerns seem very specific. The India Express report said, “The Department of Revenue note could cause “serious damage” to the government’s case, warned Mehrishi. For, there can be “little doubt,” he said, that Shah would procure a copy of it under the RTI Act and “will get a fillip to his case for not merging the entities on the ground that even the Ministry of Finance is opposing it.” Even the CBI could make it a part of its ongoing investigation, Mehrishi wrote.”
That sounds like a guidance note for Shah and his colleagues. The RTI application might well be on its way, in case it hasn’t reached already.
Anyway, if at all the fighting departments’ concerns were about Shah getting away, penning signed notes that could be leaked later was surely not a way of ensuring this. In fact, they seem to have achieved exactly the opposite, especially when Shah and his colleagues are clearly and openly leaving no stone unturned in stalling the merger.
For a government that prides itself on talking in one voice on critical issues, lack of consensus on “how not to let Jignesh Shah get away” could become a huge embarrassment. It has already become a hot issue on social media, with different sides asking different questions. Care should be taken to ensure that the story does not go from “how not” to “how”.