FTIL-NSEL Merger Is Setting a Wrong Precedent
The forced merger proposed by MCA in the draft proposal on 63 moons is the first in history of Corporate India. Nobody likes anything forced on them, especially if it is unwarranted, and in this particular FTIL– NSEL merger, it is also about the fact that the proposal reeks of violations. As a law student, I think the Government should consider understanding the merits of the case. I have also read ‘The Target Book’ by Shantanu Guha Ray and believe that FTIL and Jignesh Shah must be given another chance.
To begin with, section 396 of the Companies act, 1956, violates article 14 of the constitution on executive overreach. It becomes important to note here that there are no guidelines for the exercise of this power by the central government and that this decision erodes the net worth of FTIL and makes the company commercially unviable- a direct violation of the shareholders’ fundamental right to carry on business under Article 19(1)(g) of the constitution.
To add on, a non-consensual merger of two private entities is deemed discriminatory. It even goes against MCA’s own circular dated April 20, 2011 according to which consent of 100% shareholders and 90% creditors needs to be obtained for a merger to take place. As much as even an opportunity was not provided to the stakeholders or creditors of NSEL or FTIL and this by the way is a violation of article 14 of the constitution once again.
For more information check The Target Book Reviews.