NSEL issue: HC's final hearing on merger with FTIL after 4 weeks

The high court here has told Financial Technologies (India) Ltd (FTIL) to file a reply in four weeks to the central government's response on the issue of the merger into it of scam-hit National Spot Exchange Ltd (NSEL).

The court is to commence a final hearing into the issue after four weeks. The merger was directed by the government and opposed by FTIL, parent company of NSEL.

It is the first time such powers have been invoked by the government for private companies and its response to the court has explained why it invoked Article 396 of the Companies Act, which empowers it to order such a merger in the public interest. 

At Monday's hearing, the two-judge bench of V M Kanade and Anoop V Mehta held that the reply, filed by the ministry of corporate affairs (MCA), needed to be studied by FTIL.

“Article 396 was never invoked for a private company so far, in the 60 years of the (law's) existence. This was exercised only for government companies so far, that also after obtaining 100 per cent shareholders’ nod of the target company (FTIL in this case)," argued FTIL counsel Janak Dwarkadas. 

On February 12 this year, MCA had issued the order, saying this to recover money from cash-rich FTIL, as it was responsible for the payment crisis at NSEL. The crisis led to Rs 5,600 crore of payment default in July 2013, involving 23 borrowers.

Once a merger is approved, the entire liability of the Rs 5,600 crore of payments would come on FTIL.

“There are a host of other arguments, based on which we are objecting to MCA’s merger order,” said Dwarkadas.