In a move that is likely to help investors hit by the alleged Rs. 5,600-crore fraud at the National Spot Exchange Ltd (NSEL) recover their dues, the government on Tuesday ordered merger of NSEL with parent company Financial Technologies (India) Ltd (FTIL).
The news sent FTIL’s shares tumbling down 20% on the Bombay Stock Exchange, wiping out nearly Rs. 200 crore from the company’s market value.
According to the order issued by the corporate affairs ministry, the Jignesh Shah-promoted FTIL group would be required to absorb NSEL and all its liabilities including payments to brokers, investors and others. FTIL owns 99.9% of NSEL,
So far, the crisis-hit exchange has managed to recover only about Rs. 360 crore in dues from defaulters, a part of which has been disbursed and the rest is in an escrow account.
FTIL said in a statement that it has received a communication from the government and “is taking appropriate steps in the matter in consultation with the legal counsel of the company”.
The government order said that the decision was taken keeping in mind the “essential public interest” since the exchange is “not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues.”
{{/usCountry}}The government order said that the decision was taken keeping in mind the “essential public interest” since the exchange is “not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues.”
{{/usCountry}}The government can intervene in such cases invoking a legal clause allowing it to order a merger of two companies to protect public interest.
The government’s move to merge NSEL with FTIL is the first major intervention among private sector companies after the Satyam case that came into light in 2009.
NSEL, the electronic exchange for spot trading in agriculture and food commodities, was set up by the FTIL Group. Following the NSEL scam, several FTIL group companies have also been facing regulatory actions.
Meanwhile, the Mumbai Police on Tuesday arrested two top honchos of different defaulting companies, which collectively owe over Rs. 1,000 crore to NSEL.