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The Ministry of Corporate Affairs’ decision to put a draft order on its website proposing the amalgamation of NSEL with FTIL could result in another legal battle delaying relief to investors, say market analysts.
“Shareholders of FTIL can always object to what the Government is doing and file a case in the High Court and the battle might finally end up in the Supreme Court irrespective of the party in whose favour the High Court rules. “This would be time consuming and might benefit the promoters of FTIL but not the minority shareholders of FTIL and NSEL investors. For them, it would be better, if the issue gets resolved earlier,” said Daljeet Singh Kohli, Head of Research, IndiaNivesh Securities.
On August 18, commodity market regulator, Forward Markets Commission, had written to the Union Government, stating: “The equity investment carries inherent investment risk. The shareholders of FTIL enjoyed benefits like higher dividend, capital appreciation by way of rise in share prices at the time of higher profits of the company which were derived from NSEL operations.
“Therefore, as shareholders they are bound to be fully aware of the fact that if they are enjoying the benefits from the performance of the subsidiary company (NSEL), they may have to also bear the risk associated with the omission and commission by the holding company.”
According to Tejesh Chitlangi, Partner, IC Legal, “This draft order, if implemented, may prove to be beneficial to NSEL’s investors who got duped. However, it is likely to be detrimental to the public shareholders of FTIL, whose shareholding is substantial as on date.
“Such measure would also be unprecedented, since even in the Satyam Computers scam the troubled company was sold to a willing third party through an auction and a merger was not forced on a listed public company, unlike what the current draft order proposes to do. It is not clear if SEBI's inputs have been provided to the Ministry and considered by it, since the interest of public shareholders is also at stake.” According to the MCA draft order, FMC had recommended the amalgamation as NSEL was able to pay only 6.7 per cent of its outstanding dues or ₹362.43 out of the total of ₹5689.95 crore to 13,000 investors.
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