Even a year after the National Spot Exchange Ltd (NSEL) crisis broke out, a majority of investors on the exchange are yet to receive settlement of their dues. But Financial Technologies, the corporate promoter of NSEL, has managed to raise substantial cash through sale of stakes in the various exchange businesses it owns.

Stake sales

Last year, soon after the NSEL crisis broke out, Financial Technologies sold its entire stake in its Singapore arm SMX for $150 million, about ₹900 crore. After that, as Indian regulators held the firm not ‘fit and proper’ to operate exchanges, it began the process of stake sales in the other Indian exchanges that it owns.

Last month, FT successfully sold a 2 per cent stake in commodity bourse MCX to Rakesh Jhunjhunwala and offloaded another 4 per cent in the open market and raised about ₹220 crore. It is now set to raise a further ₹459 crore by selling another 15 per cent in MCX to Kotak Mahindra Bank; the deal is awaiting regulatory approval.

The company is also in the process of exiting IEX (Indian Energy Exchange), another of its ventures, and its stock exchange the MCX-SX. It also owns some shares in NSE.

The stake sales it has already made are likely to get FT ₹1,600-1,700 crore.

So does this signal light at the end of the tunnel for NSEL investors, who have over ₹5,000 crore of unsettled dues from their trades?

No, say legal experts. Given the company structure, though NSEL is a wholly-owned subsidiary of FT, the latter cannot be asked to cough up cash to settle NSEL’s obligations, unless a court orders it to do so.

Limited liability

Ramesh Vaidyanathan, Managing Partner, Advaya Legal says, “I don’t think NSEL investors can lay claim to the sale proceeds as a matter of right. Under normal circumstances, the liability of shareholders in a company is limited to the extent of their contribution.

“In other words, a shareholder is not liable for the liabilities of the company, even if the shareholder holds 100 per cent of the shares of the company.

In exceptional circumstances, where the court comes to the conclusion that the company has been created with fraudulent motives to shield the shareholder, the court will hold the shareholder responsible.

“This will entirely depend on the facts and circumstances of each case. In the NSEL case, the Bombay High Court is currently considering the issue as to whether this is a fit case for piercing the corporate veil.”

Piyush Vora, Partner, BDO India LLP, is also of the same opinion.

“Legally speaking, NSEL and Financial Technologies are separate entities. Unless specifically ordered by the court, FT is not obliged to fund NSEL to meet its obligations to investors”.

The debt recovery process is still on at NSEL. One needs to wait until the process is complete to see what decision the court takes, add experts.

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