NSEL crisis: Govt mulls board changes for merged entity
After ordering merger of crisis-hit NSEL with parent firm Financial Technologies to help affected investors get their dues, the government is starting a process to assess compensation amounts and is also considering a proposal to make changes to the Board of the merged entity.business Updated: Oct 27, 2014 16:27 IST
After ordering merger of crisis-hit NSEL with parent firm Financial Technologies to help affected investors get their dues, the government is starting a process to assess compensation amounts and is also considering a proposal to make changes to the Board of the merged entity.
The corporate affairs ministry last week unveiled a proposal to merge NSEL -- which has been embroiled in an over Rs 5,600 crore payment crisis -- with Jignesh Shah-led Financial Technologies (India) Ltd.
Sources said the ministry would now start a process of assessing the compensation amount to be given to affected investors and a chartered accountant entity might be appointed in this regard.
Besides, the possibility of completely or partially replacing the FTIL board would also be looked into, sources said, adding that these proposals are being considered after taking into account suggestions made by the commodity sector regulator FMC (Forward Markets Commission) and other government departments.
This is the first time that the ministry has invoked a clause in the Companies Act for a forced merger in the private sector due to "public interest", while a takeover of FTIL board, if it happens, would be the first such development since the Satyam case in 2009.
In Satyam case, the scandal-hit IT firm was later sold to Tech Mahindra through a government-monitored auction.
Post merger, FTIL would take over all the liabilities of National Spot Exchange Ltd (NSEL), including payments due to be paid to investors and others to help in repayment process.
Soon after the government's amalgamation order on October 21, FTIL had said in a brief statement that it "is taking appropriate steps in the matter in consultation with the legal Counsel of the company".
No immediate comments could be obtained from FTIL on the proposal for making changes to its Board following merger of NSEL, which itself would fructify after taking into account submissions and objections, if any, made by the shareholders and creditors of the two companies.
FTIL shares were trading nearly flat at Rs 195.75 in morning trade after paring their opening trade gains.
The ministry's decision comes more than a year after the payment scam at NSEL came into light in July 2013. The move has been initiated taking into consideration "essential public interest" as the exchange is "not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues".
So far, the crisis-hit spot exchange has managed to recover only little over Rs 360 crore dues from defaulters, a part of which has been disbursed and the rest is in an escrow account. Funds worth about Rs 5,300 crore are yet to be recovered for subsequent payment to affected investors.