We refer to the news report "FTIL may move CLB against govt's board rejig proposal" (October 30). It is entirely incorrect to compare Financial Technologies India Ltd (FTIL) with Yukos Oil of Russia and the actions of President Vladimir Putin with that of Government of India. In the case of Yukos, the actions were entirely politically motivated based on a personal clash. On the other hand, the actions proposed by the Ministry of Corporate Affairs are based on intensive investigations carried out over 15 months Regarding the merger of National Spot Exchange Ltd (NSEL) with FTIL, it is the first detected case in the history in which a company has promoted a subsidiary solely for the purpose of defrauding investors. If Section 396 is not used, then there will be a flood of fraudulent subsidiaries in the country. Again, the case of merger of NSEL with the parent company is completely different from the case of companies defrauding banks. The banks do take corporate guarantees from the parent company and other forms of security from clients, unlike retail investors in commodity and capital markets.
The concern of small shareholders of FTIL is also misplaced, since 96.39 per cent of the shareholders own only 6.84 per cent of the equity. Only 133 shareholders own 86.35 per cent of equity. These 133 shareholders include the promoter Jignesh Shah and people close to him. FTIL shareholders have benefited immensely because NSEL contributed almost 82 per cent of FTIL's consolidated profits. They got hefty dividends and enjoyed very high share price.
The pending civil suit in the Mumbai High Court and the working of the three-member committee set up by the Mumbai High Court are independent of government decisions.
Lastly, we need to compliment the government's bold step. It will instil confidence among investors who form the backbone of any growing economy. The fact that Section 396 has been rarely used shows the maturity of the government in not using this Section recklessly. There is no reason to panic and believe that FTIL will not have a future after the supersession of the board and merger with NSEL.
Sharad Kumar Saraf, Chairman, NSEL Investors Forum Mumbai
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
