Bombay HC dismisses FTIL's petition against govt order to merge with NSEL

FTIL counsels argued that use of government order in this way was illegal, considering that the liability of NSEL was yet to be established.

The Bombay High Court today dismissed a petition filed by the erstwhile Financial Technologies (India) Ltd (FTIL) challenging a 2016 decision of the Union government ordering its merger with its subsidiary, National Spot Exchange Ltd (NSEL).

"The petition is dismissed," said a division bench of Chief Justice Manjula Chellur and Justice M S Sonak.

The court, however, extended for 12 weeks an interim stay granted last year to the merger order passed by the Union Ministry of Corporate Affairs on February 12, 2016.

Soon after the merger order was passed, FTIL, now known as 63 Moons, had approached the high court.

The government had said it was passing the merger order under section 396 of the Companies Act, 1956 after a Rs 5,600 crore payment default rocked NSEL in July 2013.

Section 396 gives power to the central government to merge companies in public interest.

FTIL argued that with the merger order, the government sought to make FTIL responsible for the liabilities of the fraud-hit commodities bourse, NSEL.

FTIL counsels argued that use of section 396 in this way was illegal, considering that the liability of NSEL was yet to be established.

"If the power to amalgamate is being used to mulct (extract money from) shareholders and stakeholders of a parent company with putative liabilities of a subsidiary, it could only be done after existence of such a liability is established upon adjudication," an FTIL lawyer had argued.