Who will reverse the irreversible after the damage is done? On 4 February, 2015, Bombay High Court vacated the status quo in the NSEL-FTIL merger order by the Ministry of Corporate Affairs (MCA). The court had ordered status quo in the matter on 27 November, 2014. Now, it has vacated its order allowing the government to pass a final order, after hearing from all stakeholders and parties viz. NSEL, FTIL, shareholders, creditors and others affected and related in the case. The decision was held by the two judge bench consisting of Justice V M Kanade and Justice Revati Mohite Dere.
The government was ordered to proceed with the hearings within 4 weeks and issue the final order within 4 weeks from then on, reported by Business Standard on February 4, 2015. As per the news reported, the order will become effective in two weeks from this time.
"In case of adverse order, however, the petitioner (FTIL in this case) may come back to the court. The final order would be kept in abeyance till the hearing continues in this court. The government's final order will be subject to the court's approval," the court said.
The government was perhaps in a hurry for action, thus acted in a breakneck speed on FMC’s recommendation of merger, on 21 October, 2014; it was a view and voice of myriad from the business world besides the media vents. It was time and again decried against by many, in vain. It was also denounced saying though the merger order was as per section 396 of the Companies Act, 1956, but it is usually done in the public interest, which was missing in this case.
On the occasion, incorporation of legal validity of the government’s order was urged for by Abhishek Manu Singhvi, NSEL’s senior counsel; he further questioned if it was in government’s jurisdiction to pass the merger order.
He argued saying, "Under Section 396 of the Companies Act, two public sector companies can be merged only in public interest provided the government is prima facie satisfied that the amalgamation will benefit shareholders and all concerned of the two companies which is absent in this case. While FTIL is a business oriented company with 63,000 shareholders with it, NSEL is a separate entity with no business and only liabilities. No rules in the world suggest merger of two legal entities with varied business interest." (As per the news report by Business Standard, February 4, 2015)
It was alleged by him that the government’s issued draft order, seemingly said to be the final order, was to protect the interest of 781 high net-worth investors (HNIs), whose total investments amount to 66% of the total defaulted sum of Rs. 5600 crore.
"The proposed merger order, if any, would be irreversible and hence would open a floodgate of litigations as a number of litigations of similar nature are pending before various courts."
Supplementing it, Janak Dwarkadas, another FTIL counsel said, “.. the government's draft order takes care of just 781 traders and completely neglects 63000 shareholders and 1500 employees of FTIL." (As per the news report by Business Standard, February 4, 2015)
Further, government’s counsel, Ranjit Kumar’s allegation that saving ‘Odin’ as FTIL’s core business and the sale of assets like Bourse Africa and Bahrain was in violation of the status quo order was rejected by the court.
On this, a Mumbai-based corporate lawyer reacted saying, "The proposed merger order, if any, would be irreversible and hence would open a floodgate of litigations as a number of litigations of similar nature are pending before various courts." (As per the news report by Business Standard, February 4, 2015)