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Financial Technologies has asked its shareholders to oppose the proposed “forced” merger of crisis-hit National Spot Exchange Ltd (NSEL) with itself.
The Government, in October last year, had ordered the merger of NSEL with its parent firm Financial Technologies (India) Ltd.
The draft order, issued by the Ministry of Corporate Affairs, was aimed at ensuring faster recovery of dues for entities hit by the Rs 5,600-crore fraud at the bourse.
“... we request you as a responsible owner of your company to send to the Ministry of Corporate Affairs, your genuine, bonafide and reasoned objections to the draft order,” FTIL board chairman Venkat Chary said in a letter to shareholders.
Chary, who is also an Independent, Non-Executive Director, said the company is pursuing every legal means available to ensure that rights of over 63,000 shareholders are protected.
“You (shareholders) too are entitled to object to the forced amalgamation of NSEL with your company by exercising your right of opposition...,” he said.
Even though FTIL has challenged the Ministry’s draft merger order, the Bombay High Court has ruled that the Ministry can pass its final order and then the company can challenge the same.
According to the letter, FTIL has Rs 2,000 crore cash and a debt of Rs 475 crore after it was forced to sell its stake in MCX, MCX-SX and SMX, among others.
“Assets like BFX, Bourse Africa, DGCX and Atom will add further to FTIL’s cash reserves. These cash reserves of FTIL belong to you and only you, the 63,000+ shareholders of FTIL, as your legal right,” the letter, dated February 24, said.
The proposed merger would adversely impact shareholders and over 1,000 employees, it added.
“What we fail to understand is why the MCA is in such a tearing hurry to forcibly amalgamate NSEL with FTIL, when the challenge to the FMC (Forward Markets Commission) order is pending and the question of whether or not FTIL is liable for the alleged events at NSEL is pending adjudication before the Bombay High Court?” Chary said in the letter.
Post-merger, NSEL’s entire business, properties and liabilities, among others, will get transferred to FTIL. The payment crisis at NSEL came to light in July 2013.
“Should the proposed amalgamation be permitted, it will open the doors for similar action being taken in every case where a subsidiary is facing an unproven/potential liability, so that the holding company is then sought to be held liable through the mechanism of such forced amalgamation,” the letter said.
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