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The Supreme Court today set aside the Union Government’s decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Ltd (FTIL), now 63 Moon Technologies Ltd.
NSEL, which was promoted by the then FTIL, shut down in 2013 after a major payment default. NSEL has since been ordered not to enter into any fresh contracts by the Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI).
Post the scam, the Ministry of Corporate Affairs (MCA) decided to issue a final order for merger/amalgamation of NSEL with FTIL under Section 396 of the Companies Act, 1956. In February 2016, the MCA had passed a final order directing the merger of scam-hit NSEL with FTIL. FTIL, promoted by Jignesh Shah, is the parent company of NSEL with 99% shareholding.
The draft order was issued in October 2014. This was the first time this section was invoked by the government for a forced merger between two private companies. If actualized, such a merger would have forced NSEL’s liabilities on FTIL and make FTIL a party to the ongoing litigation.
The decision was first challenged at the Bombay High Court by FTIL but was dismissed in December 2017. An appeal was made to the Supreme Court.
“We have allowed the appeal,” said a bench of Justice Rohinton Fali Nariman and Justice Vineet Saran in their judgment setting aside the High Court order.
The Court today held that the merger doesn’t satisfy the criteria of ‘public interest’ and laid down a set of guidelines on what ‘public interest’ would amount to.