One ID, many emails on the NSEL-FTIL merger

MCA says FTIL trying to choke it with concerted responses; company blames MCA for delay

The Union ministry of corporate affairs (MCA) on July 24 told the Bombay High Court it has received about 45,000 representations on the proposed merger of National Spot Exchange Ltd (NSEL) with its parent Financial Technologies India Ltd (FTIL). Many of these responses, purportedly sent by FTIL shareholders, are from a single email ID, shareholder@ftindia.com.

MCA has alleged these representations were being deliberately sent in a concerted manner to delay decision-making. The MCA is in the process of passing a final order on the matter, seen as resolution of the Rs 5,600-crore NSEL payment crisis. However, the FTIL management has been fighting the move, claiming many of its retail shareholders are opposed to this.

The  ftindia.com domain name belongs to the company and is used by group executives.

MCA has shown the court dozens of responses that are identical in language and format, prompting a lawyer to say these are “copy-paste” responses. But these responses had different names, as well as depository participant IDs and the number of shares held. The submission has raised doubt about the authenticity of these responses and whether or not these have been made with the knowledge of shareholders.

A representative of NSEL Aggrieved and Recovery Association, an investor group, said, “Not only is this brazen misuse by a listed entity of its shareholder database, it also raises serious doubt on shareholder support to FTIL/Jignesh Shah’s actions resulting in the NSEL scam.”

The ministry feels the company management is behind this. “The applicant company had attempted to burden and choke MCA with about 45,000 representations on the draft order and from the repetitive language and the nature of the objections and suggestions mentioned therein, it is clear these are filed in concert or with the intent of flooding the MCA with a huge burden to slow the process of taking a final view under section 396 of the Companies Act, 1956,” a senior official said in an affidavit filed on behalf of the ministry. The affidavit was in response to a chamber summons filed by FTIL, seeking inspection of the MCA documents relied upon to pass the draft merger order. The ministry also dismissed various grounds raised for such inspection as devoid of any merit and accused the company of wasting time on “specious technicalities”.

The affidavit said, “Indeed, instead of raising any substantive issues, the applicant is raising specious technicalities and avoiding the core issues on merit.” Business Standard sought FTIL’s comment on whether the company or any of its representatives operated the email id mentioned earlier and whether someone had been authorised to operate this ID on behalf of shareholders. In an email response, incidentally from an ID bearing the same ‘ftindia.com’ domain name, the FTIL spokesperson did not directly respond to queries on the email ID.

“The queries raised by you are based on some fallacious arguments that 45,000 objections to the merger have been received by MCA. While you might have raised this query, it is best to understand the matter from a fair viewpoint, which has been dealt with in our reply. Please put on record that we have never asked for even a single extension. It has always been asked by MCA. Kindly see their petition,” the spokesperson said.

FTIL said it had organised voting by shareholders in the truncated time limit given to it. “Despite our request, we were given a month, not 45 days, to hold an AGM and an AGM resolution that allows for e-voting as well as physical voting on the resolutions. The equivalent of that infrastructure and a transparent process were set up, as the court gave merely three-four weeks,” the spokesperson said.

The company said through the voting process, 19,000 shareholders voted against the merger and “more than 500 votes have gone for the merger also”. It asserted the entire process of voting was certified by CESA and “certificate and physical copies of all the letters in the form of votes have been formally submitted in CD, as well as in print, to the MCA in some 40 box files, for which we have valid acknowledgement.”

According to the FTIL spokesperson, the MCA hadn’t expected that shareholders would vote with such a vociferous voice; it expected to receive a small box of response from the 63,000 shareholders. “The huge response shows the agony of 19,000 shareholders, representing 80 per cent of the company, against this forced merger. The merger itself is an illegal act, completely based on the false recommendation made by the FMC (Forward Markets Commission) chairman, which was way beyond his jurisdiction in the Forward Contracts (Regulation) Act,” the spokesperson said.