Govt approves NSEL-FTIL merger; FTIL plans to challenge order

The government has approved the merger of the now defunct National Spot Exchange (NSEL) with Jignesh Shah-promoted Financial Technologies Limited, paving the way for FTIL to handle the financial fallout of the Rs 5,600-crore NSEL scam. The order on amalgamation of NSEL with its parent company FTIL has been issued by the Ministry of Corporate Affairs (MCA). The NSEL-FTIL merger was recommended by the erstwhile commodities market regulator FMC. This suggestion was made after the Rs 5,600-crore payment default surfaced on the spot exchange.

Soon after, FTIL expressed its disappointment with the order. "The said 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," FTIL said in a press release. Such a move is unprecedented, as this is the first time in the history of corporate India, a subsidiary company is being forcibly merged with its parent company through an executive fiat.  However, FTIL plans to challenge the order. FTIL Managing Director Prashant Desai said: "As per the court's earlier order, there is an automatic stay of two weeks on the operation of the Merger Order. We will challenge the Merger Order before the High Court at the earliest, and are confident that justice will be done."Late last year, when the government came out with the draft order to merge the two, it was challenged by FTIL in the court and at that point the court had asked the government to come out with its final order and had given FTIL the permission to approach the court again.The NSEL Investor Forum on the other hand welcomed the order and said it keeps investors' interest in mind.The implication of this merger ofcourse is that the entire liability of the Rs 5,600 crore scam now comes on the books of FTIL and hence its shareholders.