In the wake of government’s proposal to revamp FTIL board following its order to merge NSEL with FTIL last week, the business community at large cedes it to be starkly unsavoury. The move has been debated on various media mouthpieces calling it unwarranted or “a bad precedent.” It has been countered by FTIL maintaining all the while that all efforts pertaining to recovery are being diligently escalated. Also, FTIL is a healthily functional company with the strength of over 1000 employees and over 60,000 shareholders; therefore, persecuting FTIL will be prejudiced and uncalled-for, for expediting recovery from the defaulters.
The outcry has gone unheard, and the merger proposed by Forward Market Commission (FMC) is believed to culminate, making all those who haven’t invested for it bear the brunt of liability. The massively voiced standpoint ‘why to foist one’s liability on the other’ has gone unheeded. The merger will not only have a tumbling impact on the tradition of limited liability - mainly, on the corporate India, but it will also discourage investors from investing in various portfolios, impacting the economy adversely. It is also viewed as the nosedive of defaulters to the extent of duping trading clients is being ignored, besides disregarding FTIL’s diligent recovery efforts.
What’s more thwarting is that there’s no charge against the company itself, with no trace of fund squandering even to the promoters, yet the move has been initiated. Needless to say, the sanctity of the bourse and markets is being imperilled, setting a wrong precedent. On various occasions during the proceeds of the case, Bombay HC’s observation on some portraying as traders, being sceptical about their legitimacy as traders has been emphasised time and again, which has also been utterly condoned.
More precisely, Limited Liability of a parent company determines the amount of money and resources the company has invested in its subsidiary company; this emerges as the straightforward norm of modern financial officialdom, which is seen as being “violated and forsaken” and, principally, believed to send wrong indication to present and future investors. Thus, it will have a surging effect on the economy, as the ‘limited liability’ model is an indispensable offshoot to propel entrepreneurship and investment.
It is commonly viewed that a small section of trading clients claiming their money may not constitute a vast majority of people, thus the parity of ‘public interest’ action is far from being apt to the Companies Act provision, especially, in this scenario. The protection of public interest mechanism is equally workable across-the-board; therefore, safeguarding interests of parent company’s shareholders, employees and stakeholders at large is as much essential, which is being overlooked. As a result, to protect a handful of brokers of the crisis-hit NSEL, staking a colossal cluster of 60,000 investors and over 1000 employees of FTIL, is simply based on a decision of the bureaucracy. How far it is wise to substitute FTIL’s stakeholders’ liabilities and interests for NSEL’s, needs a relook, and a popular perspective.