To ensure speedy recovery of dues for investors and others hit by Rs 5,600-crore "fraud" at the National Spot Exchange Ltd, the government today ordered merger of the scam-hit firm with its holding company FTIL.
The decision, which comes over a year after the payment scam broke out at NSEL in July 2013, has been taken in "essential public interest" as the exchange is "not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues".
The move to merge NSEL with FTIL -- possibly the first major government intervention in a scam-hit private sector entity since the Satyam case in 2009 -- would take a final shape after taking into account submissions or objections made by the shareholders and creditors of the two companies.
However, the government has ordered merger of NSEL with its parent firm itself in the present case, unlike the Satyam matter where the scam-hit IT firm was sold to a third-party (Tech Mahindra) through a government-facilitated auction.
NSEL was set up as an electronic exchange for spot trading in agriculture and food commodities by Jignesh Shah- led FT Group. Financial Technologies (India) Ltd is the holding company of this group, which had also set up commodity bourse MCX and stock exchange MCX-SX, among other exchange ventures.
Following the NSEL fiasco, various FT group entities have already faced regulatory actions and they do not figure as promoter entities in ventures such as MCX and MCX-SX.
"The central government has decided on the merger of NSEL with its holding company FTIL, in public interest under Section 396 of the Companies Act, 1956," the Corporate Affairs Ministry said in a statement.
With regard to NSEL case, a charge-sheet has been filed by the Economic Offences Wing of the Mumbai Police against Jignesh Shah -- the founder and managing director of FTIL.
There were no immediate comments on the government decision from FTIL, which saw its shares tank by nearly 20 per cent to hit the lower circuit of Rs 169.65 on the BSE.
