Merger NSEL with its Parent Company : Completely Unjustified

The merger of NSEL with its parent company 63 moons (formerly Financial Technologies India Limited) proposed by the Ministry of Corporate Affairs is in contravention and conflict with established conventions and Principles of corporate law.

Going by rational thinking and logic, it’s impossible to get benefit out of something by forcing it on anybody. The best example of such a case is forced merger of NSEL and 63 moons, which is clearly against the corporate gain.

It stems up scathing questions around limited liability, the concept that defines the core of our corporate legislature. Also, with Vodafone’s struggle with corporate governance laws and Vijay Mallya managing to get away abroad, the nation already has a lot going on to uphold its corporate image. And with the NSEL merger with 63 moons, it’s only an unwarranted cherry on the cake.

The case has created quite an upheaval over the years and slipped away from its very core. The government by invoking the provision of section 369 of the Company Act intends to serve public interest, but just ‘how’? That’s a baffling question given that the merger, by piling on accrued liabilities to the tune of Rs. 5,600 crore on 63,000 shareholders, defies fiscal equilibrium.

Ideally, the FMC should have worked towards realizing the recovery from the assets frozen for the particular purpose of protection of the rights of trading clients rather than taking a measure that deprives the rights of investors in the parent company.

The merger order is completely uncalled for as NSEL has been consistently, and to the knowledge of FMC, taking several steps towards the recovery of the amount due and payable by the defaulter members.

The merger order of NSEL with its parent company 63 moons, also posits a very questionable image in front of foreign investors, keen to be a part of ‘Make in India’. Such a move hurts the fiscal mobility of 63 moons and sets up a strong case of executive overreach. That ideology sums up the approach of Jignesh Shah, who is widely seen as an example of Make in India.

Meanwhile, SEBI has finally made its way in with a new association with Forward Markets Commission (FMC) to dig and unearth evidences from deeper under the bedrock, bringing into scrutiny the role of NSEL brokers and traders. Besides vindicating Jignesh Shah, this also raises hopes of a fair trial finally ensuing on.

Reference: Shantanu Guha Ray:(2016): ‘The Target: New Delhi: Publisher: AuthorsUpFront