As a face-off continues between Jignesh Shah-led FTIL and Corporate Affairs Ministry over NSEL merger, the government in its final order has said that over 96 per cent of the objections received on the proposed amalgamation prima-facie were “orchestrated and concerted”.

In a first-ever move forcing the amalgamation of two private companies, the MCA has ordered the merger of crisis-hit National Spot Exchange Ltd (NSEL) with its parent FTIL (Financial Technologies India Ltd) in “public interest”.

FTIL has termed the final order as “highly disappointing” and would challenge it in the High Court.

A total of 50,389 representations, through physical papers and emails, were received by the Ministry with respect to the proposed merger of NSEL with FTIL during March-October 2015, according to the final order.

They were submitted in response to a public notice issued by the Ministry seeking comments from entities concerned.

“It is observed that over 96 per cent of objections are from shareholders of FTIL (48,422 out of the total 50,389 records). It is reiterated that language and manner of emails and representations purportedly from the shareholders are almost ditto and from the email id seemingly created by FTIL.

“The emails were sent in bulk and thus the email box was dumped resulting into bouncing back of a few emails. Later, the physical copies were received and considered. Prima-facie, these objections were orchestrated and concerted,” the 47-page final order said.

It further said 1,203 objections were from FTIL staff and they too were repeating the same objections in similar language. Prima facie, these objections were “orchestrated and concerted”, it added.

Once implemented, the final directive, which confirms the Ministry’s draft order in October 2014, would amalgamate the two entities into one and all the assets and liabilities of NSEL will get transferred to FTIL.

The Rs 5,574 crore payment crisis at NSEL came to light in late 2013. Since then, the matter has come under the scanner of multiple regulatory and investigation agencies.

Reacting to the development, FTIL later said it had organised voting by shareholders in just 30 days time.

“Despite our request, we were given a month, not 45 days, to hold an AGM and an AGM resolution that allows for e-voting as well as physical voting on the resolutions. The equivalent of that infrastructure and a transparent process were set up, as the court gave merely three-four weeks,” an FTIL spokesperson said in a statement.

“We completed the entire voting process in a most transparent manner, informed both the stock exchanges and also gave an advertisement in newspapers. After our submission to MCA, the Ministry of Corporate Affairs had one year time to ask us to hold an AGM.

“The entire process of voting was certified by CESA and certificate and physical copies of all the letters in the form of votes have been formally submitted in CD, as well as in print, to the MCA, in two boxes of 100 kg each, for which we have valid acknowledgment,” the statement added.

FTIL also said there cannot be more authentic documents like CESA-certified voting process, which includes e-voting as well as physical voting comprising all KYC-related documents and personal email IDs of each shareholder.

“It is very surprising and unfortunate that CESA-certified voting process has not been considered by MCA and it is clearly seen that it is a pre-mediated decision of MCA to issue the merger order which has breached the concept of limited liability,” it added.

Referring to action being taken by various agencies, the government order said as per the Economic Offences Wing, Mumbai, the total amount recoverable from 24 defaulters is Rs 5,689.95 crore while injunctions against assets of defaulters worth Rs 4,400.10 crore have been obtained.

Among others, “assets worth Rs 5,444.31 crore belonging to the defaulters have been attached,” by the Economic Offences Wing.

The Enforcement Directorate on the other hand has traced proceeds of crime amounting to Rs 3,973.83 crore to 25 defaulters.

“Enforcement Directorate has attached assets worth Rs 837.01 crore belonging to 12 defaulters...,” the order said.

The order said the merger shall result into making NSEL and FTIL as one single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of resulting company.

“Adequate safeguards have been provided in the final order with regard to the litigations pending and devolving of liabilities and assets arising out of pending proceedings,” he noted.

The amalgamation would be effected from March 31, 2015 for the accounting purposes.

As per the order, all shares of NSEL held in the name of FTIL including their nominees before the amalgamation would be cancelled. For shares held by minority shareholders, namely NAFED, the merged entity would allot 38 shares to NAFED.

Incorporated in May 2005, NSEL started functioning as a spot exchange around 2008. The government said NSEL was neither recognised nor registered under the provisions of the FCA (Forward Contracts Regulation Act) and since it was granted exemption under a section by the Department of Consumer Affairs it was never under the regulatory purview of the then commodities markets regulator FMC.

FTIL was incorporated in January 1995.

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