Govt orders merger of NSEL, FTIL

MUMBAI: In a surprise move, the ministry of corporate affairs (MCA) on Friday ordered the merger of National Spot Exchange (NSEL) with its promoter Financial Technologies (FTIL). The ministry’s objective is to compensate the traders who had transacted on the now defunct NSEL (the government had asked it close down in late 2013), from the cash holdings of FTIL, a listed entity. FTIL is moving the Bombay high court to challenge the government order.
In July 2013, the commodities futures market regulator Forward Markets Commission (FMC) had ordered NSEL to discontinue its commodities contracts. Within weeks, the exchange folded up with about 13,000 investors unable to get paid from a handful of borrowers on the exchange. The borrowers owed about Rs 5,500 crore to the investors on the bourse.

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Subsequently, FMC — which has since been merged with market regulator Sebi — ruled that NSEL’s contracts were illegal. It also filed police complaints for alleged money laundering that led to the arrest of several bourse officials, including FTIL’s main promoter Jignesh Shah and its MD Anjani Sinha. Several of the borrowers were also arrested. All are now out on bail.
The MCA then also mooted the idea of merging NSEL with FTIL so that its promoter, which held almost the entire equity of the spot exchange, could take up the liability of the investors.
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Very bad decision of the Govt. It goes against the principle of Limited Liability. A company is not responsible for the … Read More
Ashok Visvanathan

FTIL, however, had challenged the order in the Bombay high court, which asked the government to pass its final order on the FTIL-NSEL merger. The government had till February 15 to pass its final order, which came on Friday evening.
Reacting to the government order, FTIL said that “the merger order has placed the interest of trading clients higher than that of the shareholders of a listed company. MCA has also chosen to ignore the thousands of representations made by the shareholders, its creditors and hundreds of employees of FTIL and NSEL” who opposed the merger.