Bombay HC hears arguments against NSEL merger order

Harish Salve alleged the forced merger order violates the Constitutional rights of FTIL investors and employees.

Counsel for the scam-hit National Spot Exchange (NSEL) offered arguments at the high court here against the central government order that it be merged with parent entity Financial Technologies (FTIL, since as renamed '63 moons technologies').

Harish Salve, senior counsel, alleged the forced merger order from the ministry of corporate affairs was a vitiated one, violating the Constitutional rights of FTIL investors and employees.

Arguing before a bench of Chief Justice Manjula Chellur and judge M S Sonak, he said the order also breached Section 396 of the Companies Act.

The next hearing is on December 20. The entire investigation against NSEL has been made under the basic premise that it had perpetrated the fraud, not with the intention of finding out the facts, alleged Salve.

It is alleged that NSEL used fraudulent contracts. However, NSEL did not trade in contracts but its members did, using it as a platform. "There is also the allegation that the software of NSEL allowed manipulation. Manipulation by whom? It is the (guilty) members who manipulated," said Salve.

"There is no court of law proving the alleged fraud and putting its liability on NSEL. The order is full of allegations against NSEL; however, liability is unproven. The amalgamation order is based is foisting an unproven and alleged liability of NSEL on FTIL. In this case, the very reason for merger is a riddle," he said.

The claim of the aggrieved investors of NSEL is yet to be established; the matter is in court. The order says the merger is not an adjudication of alleged fraud, which means the fraud itself is not proven. The government needs to find, decide and adjudicate if there has been a fraud before ordering a merger. Also, a matter of private recovery is being passed off as a public interest matter, contended Salve.