Supreme Court dismisses SLP against Jignesh Shah’s bail

Pursuits defanged; efforts for special leave petition against Jignesh Shah’s bail order stymied

The scenes seem more ratcheted with the goings-on. Getting in the act, the efforts made by several trading clients of the crisis-hit NSEL was to reap self-desired fruition - by challenging the bail granted to Jignesh Shah, the promoter of FTIL by the Bombay high court, on 22^nd August, 2014, in the Supreme Court. Earlier this year, in August, Justice Abhay Thipsay of Bombay HC had granted bail to Jignesh Shah. 

Ultimately, the Supreme Court quashed the plea of the trading clients on Monday, 17^th November, 2014. What’s more; the state of Maharashtra wasn’t even issued notices by the bench that comprised Justice Pinaki Chandra Ghose and R K Agarwal.

To peal the overhang of the past happenings, trading clients exercised expedience. Discernibly, the appeal was in vain, when the SC quashed their special leave petition on Monday. It was flatly dismissed with no relief grant to them. Retrospectively, Justice Thipsay granted bail to Jignesh Shah, additionally stating that his custody was not necessary anymore for further investigation.

The HC then, in its judgement, pronounced saying, “Though termed as a "Rs 5000 crore NSEL scam", it is not that monies were received by NSEL, but they have gone from one bogus trader (investor) to another bogus trader (borrower).”

On another occasion, hearing on Forward Markets Commission’s mid-December order, last year, asserting that FTIL was ‘not fit and proper’ to hold shares in MCX or any other entity was before Judge S J Vazidar, last week.

On the occasion, Abhishek Manu Singhvi, FTIL’s counsel, said that the FMC’s order was implemented by the SEBI (Securities Exchange Bureau and Central Electricity Regulatory Commission (CERC) and constrained the company to go for a harried sale of its stakes in IEX, MCX and MCX-SX, which adversely impacted the companies’ valuation, entailing FTIL an enormous loss of over Rs. 1000 crore. In other words, the exits were, in a way, enforced ones, making the company face the brunt of financial damages.

“The FMC order was also being used by the government to forcibly merge the crisis-struck National Spot Exchange Limited (NSEL) with FTIL.”

FTIL’s argument was that the overall exit and sale of stakes have been ominously unsavoury; firstly, a loss of Rs. 291 crore in MCX; then Rs.250 crore lost in IEX and Rs.280 crore lost in the sale of MCX-SX stake. Furthermore, losses of Rs.11 crore from stake in Bourse Africa and Bahrain Financial Exchange incurred by the company steamrolled the state of affairs.

Counsel Singhvi’s view is – “the FMC order was also being used by the government to forcibly merge the crisis-struck National Spot Exchange (NSEL) with FTIL.”

FTIL was steadfast in filing a Writ Petition in the Bombay High Court against the government’s order to amalgamate NSEL with FTIL.

Also, the news featuring on Business Standard on 13^th Nov. 2014, reads, “FTIL also argued the fit and proper order did not specify the penalty for FTIL. This came six months later, forcing them to exit MCX at a loss.”

Unjust demeanour is evident; prejudices of sorts supersede the course of law, leaving mere footprints of agony for the present and future investors. It’s for us to muse earnestly if all of this is benign or malignant to the health of the economy at large. 

FTIL’s most recent accord with Jhunjhunwala, exiting MCX-SX

Crossing the thresholds, departing MCX-SX, FTIL entered a pact with Rakesh Jhujhunwala, selling its stake and warrants in stocks bourse to the latter.

Expressively, a share and warrant purchase agreement was entered into,  with Dr. Rakesh Jhunjhunwala; whilst separate warrant purchase agreements were moved in by FTIL, with M/s. Edelweiss Financial Services Limited, M/s. Trust Investment Advisors Pvt. Ltd. Ms. Viral A. Parikh, M/s. Nemish S. Shah H.U.F., M/s. Derive Investments, Mr. Kalpraj Dharamshi, Mr. Dhanesh Sumatilal Shah, Mr. Uday Shah, Ms. Madhuri Kela, Ms. Renuka Shah, M/s. SKS Capital & Research Pvt. Ltd. and Ms. Madhu Vadera Jayakumar for sale of its 100% stake in MCX-SX comprising 2,70,00,000 equity shares and 56,24,60,000 warrants for an aggregate consideration of Rs. 88.419 crore.

Rakesh jhunjhunwala, a billionaire investor, had earlier purchased stock of MCX - close to 2%, earlier this year, now purchased stock of MCX-SX, thus enabling FTIL to exit MCX-SX entirely. FTIL divested all of MCX-SX stock, which took place on 26 November, 2014. 

Jignesh Shah paves way - twirling up gen-next dimensions for FTIL

Transferring action to manage the state of affairs at FTIL, Jignesh Shah will not be holding any executive or managerial position in the company. A series of events did the rounds in the company lately, with the induction of new members in FTIL board last week and now the elaborate change of management that took place on 20^th November, 2014.

Overlaying a purposeful structure with constructive intents, making way for new entrants into the Board of FTIL, Jignesh Shah has charted the next phase of growth for the company. The relay took place when he handed over the cudgel of responsibilities and management of FTIL to various individuals of repute and sublime credentials.

Jignesh Shah was invited to be Chairman – Emeritus and Mentor of FTIL, and inspire entrepreneurship, whilst Prashant Desai was handed over a bigger responsibility having been appointed as MD-CEO of FTIL by the board. He is also expected to oversee the execution of the founder’s vision of FT 3.0.

The expansion of the board with 3 non-executive directors was also announced on the occasion i.e. Ms. Nisha Dutt , Mr. Sunil Shah and Mr. Miten Mehta. Ms. Nisha Dutt is a Silicon Valley veteran who holds M.S. and MBA degrees from Oklahoma State University and Ohio University, having over a decade’s consulting and technology experience in over a dozen countries. Mr. Sunil Shah is an IIM - A alumnus and founder of Gujarat Innovation Society and Mr. Miten Mehta, qualified from Kellogg’s, has twenty years of extensive experience of Silicon Valley and US.

Additionally, two more executive directors were included in the board - Mr. Jigish Sonagra and and Mr. Rajendra Mehta. Mr. Jigish Sonagra holds a business management degree and is qualified as Chartered Accountant and CISA Auditor with 14 years of rich experience in exchange technology and related products. He will be the Director - New Ventures of the Company.

Mr. Rajendra Mehta is a qualified Chartered Accountant with over 20 years of experience in banking & financial sector, and is ex-COO of CLSA. Mr. Rajendra Mehta will be Director - Member Technologies of the Company. Further, Mr. Manjay Shah and Mr. Dewang Neralla will exit from the Board of the Company. Mr. Dewang Neralla will become MD & CEO of Atom Technologies and Mr. Manjay Shah will become MD & CEO of Tickerplant.

Interestingly, it is a reconstituted board with 12 members and 5 non-executive directors and independent directors; 4 executive directors and 3 non-executive directors. The board already comprises IAS (Retd.) officers, chartered accountants, lawyers and successful entrepreneurs with start-up and corporate experience along with two directors with international exposure, making it among one of the most independent and professional board-run companies in corporate India, and is all geared up to avail the existing and new opportunities presented by the digital era.

Also, the ‘JS Digital Innovative Award’ established to honour the contribution of FTIL’s founder Jignesh Shah was unanimously approved on the occasion. The growth trajectory of FTIL has witnessed myriad dimensions and diverse paradigm technology innovation and implementation since inception, having been founded by Jignesh Shah and two of his colleagues. Several exchanges and trading terminals were set up, with a consummate distribution network, linking India with Middle East, Africa and South East Asia. Exemplarily, they were known for recreating new-age digital silk and spice routes.

More transcendent accomplishments were setting up of MCX, MCX-SX and IEX in India, SMX in Singapore, DGCX in Dubai and Bourse Africa in Mauritius, by FTIL with his vision, under Jignesh Shah’s leadership. They are among the most globally respected and recognised institutions in their respective market segments and geographies.

The announcement came after the board expansion, with induction of Berjis Desai and Anil Singhvi into the board last week, along with the founder’s vision projection for Digital India @2025 as part of FT 3.0 Made in India technology to build and power India’s own equivalent of Amazon, Google, Alibaba and Baidu et al over the next 10 years.

Mr Jignesh Shah hands over the baton of #FTIL to Next Gen FTian to lead FT 3.0

 

Link- http://bit.ly/1z0Syo0

FTIL spurs against government merger order in HC

Amidst the attempts to entrench an off beam precedent by calling for NSEL-FTIL merger; whilst myriad media vents calling it untenable, there’s barely a recourse to save the sanctity of limited liability. Also, the hoot and holler of the business community against the merger order has gone unheeded.

Fending off the unwarranted blitzkrieg is perhaps the panacea to subdue the tempest, thus FTIL moved the Bombay HC for reprieve.

Several actions were intrepid and radical, resonating impulse activism. Distraughtly, a recommendation of the NSEL-FTIL merger by Forward Markets Commission (FMC) led to a draft order by the government. Not limiting to that, the government also indicated replication of actions taken against Satyam on FTIL; in other words, a complete take-over of the management, revamping the board. Every debate, redact and views by the media outlets across-the-board stated that government seems to be raring to impose actions on FTIL. Every now and then, it was stated by most of them, including FTIL that it will ‘defeat and destroy’ the fundamental edifice of limited liability and independent corporate personality in company law, but in vain.

Therefore, FTIL opted for legal resort; thus moved the court, to challenge the order. A petition filed by FTIL in the Bombay High Court against FMC, the commodity futures market and the government, raises crucial issues. Some of them happen to be, as stated in The Economic Times news report on12th Nov. 2014 - “the merger will destroy and defeat the fundamental edifice of limited liability and independent corporate personality in company law.” Secondly, “it will open the floodgates for vested interests for seeking such forced mergers of subsidiaries with their parent companies or other entities whenever there is a problem at the subsidiary level. Finally, “The company has also prayed, among others, that the court prohibit the government and its servants, agents, officers and subordinates from superseding, substituting or otherwise howsoever changing the management of FTIL.”

FTIL is equipoised to pursue the matter, propounding the issues strongly against the government draft order, based on FMC’s recommendations of amalgamation of NSEL with FTIL, under Section 396 of Companies Act 1956. The section is a provision to empower central government for mergers or amalgamation of companies in public interest.

The petition has been filed to challenge the constitutional cogency of Section 396 of Companies Act. The bone of contention is while the edict is being construed, the High Court should interpret that the provisions of the said statute, in order to confirm the same, to be constitutionally legal and valid. Further the petition contends that enactment of Section 396 of the Act was to make available precisely little exception pared out for adherence to the provisions of Section 394 and 395 of the Act – as these put down extensive provisions pertaining to the revamp or merger of companies, along with the supplementary components.

Vision of Digital India@2025 … In Dreams Begin Responsibilities

Your dream is just a starting point. With the dream begins your responsibility to go forth and make something so great that it will change the lives of other people. The comfort you enjoy is the heritage given to you by previous generations; and now accept it as your obligation to do something for the posterity.

FTIL’s management team has resolved to execute on its founders’ vision for ‘Digital India @ 2025’. With the thrust upon “Made in India” technology, FTIL plans to build and power new generation digital enterprises equivalent to global IT behemoths. Powered by indigenous “Made in India” technology by FTIL, its management team is confident of creating technology solutions which will be India’s own Amazon, Google, Facebook, Twitter, Ali Baba and Baidu over next 10 years that can make India a technology hub.

These new Digital Disruptors will be the bellwether of inclusive development and growth besides creating a domino effect in the ecosystem that will be breeding ground to more new entrepreneurs, start-ups and job creation and will become the showcase of Digital India by 2025 by FT 3.0.

FT 3.0 is the transformation of FTIL into becoming the de facto 'powered by’ technology partner of choice to create and develop ecosystem of at least 100 new digital giants from India in 10 key sectors such as Retail, Education, Healthcare, Agriculture, Environment, Infrastructure and Space among others over the next 10 years by 2025. The Company is in the process of appointing an Industry Advisory Board and a leading Consulting firm to help it plan and execute the transformation process in to FT 3.0 and its Founders Vision of Digital India @ 2025.

FTIL’s technology, scale and execution capabilities can significantly contribute in creating and powering at least 100 new digital leaders in ten key sectors over next ten years, feels Mr. Jignesh Shah, Founder & MD of FTIL.

We are undoubtedly in an age where technology governs our lives in its all possible manifestations. Today’s dream becomes a necessity tomorrow, as technology has no boundaries; it gets evolved with very the thought of making life easier.

Supreme Court today dismissed the SLP filed by the trading clients challenging the Bombay High Court's Order dated 22.8.2014 granting bail to Mr Jignesh Shah.

Quoting futuristic vision of FTIL – on board expansion

FTIL Board reaffirms its confidence in Management Team to execute on its Founders’ Vision for ‘Digital India @ 2025’ as part of FT 3.0. ‘Made In India’ Technology to Build and Power India’s own equivalent of Amazon, Google, Alibaba and Baidu et al over next 10 years. In the series of events, ODIN to be spun out as separate subsidiary or SBU to attract majority strategic partner / investor was the highlight.

As the new directors were welcomed, the experts in FTIL alluded that the vision 2025 for FTIL was futuristic and pragmatic. The occasion of the expansion of FTIL board got stimulating citations from the leaders of FTIL, as well as the new directors.

Mr Venkat Chary, IAS (Retd), ex-Chairman FMC and Chairman FTIL, welcomed the new Directors on the Board, saying - "Both Berjis and Anil are world class industry seasoned professionals known for being highly independent and vocal about corporate governance and protecting minority shareholder interest on the companies where they serve on the Board, and FTIL will certainly benefit from their experience as the company transforms itself under leadership of its Founder and MD, Jignesh Shah, in to technology partner to build and power new generation digital enterprises that will emerge over next 10 years as part of his vision Digital India @ 2025. Prashant Desai is a thorough industry professional and has played key role in IR and M&A over past year at FTIL."

Mr Jignesh Shah Founder and MD of FTIL also congratulated the new Board of Directors and said, "I have no doubt that the new Board coupled with FTIL’s technology, scale and execution capabilities can significantly contribute in creating & powering at least 100 new digital leaders in 10 key sectors over next 10 years. These new Digital Disruptors will be the bellwether of inclusive development and growth besides creating a domino effect in the ecosystem that will be breeding ground to more new entrepreneurs, start-up’s and job creation and will become the showcase of Digital India by 2025."

Mr Berjis Desai said, “FTIL is a global leader in building robust, enterprise class, scalable and cost efficient technology for developing but fast growing markets like India, SE Asia, Middle East and Africa and I’m excited to be part of its Board as the company embarks on its journey to shift orbit and become preferred technology partner for India’s next emerging tech-enabled giants in key vertical sectors, in line with its Founder’s vision of Digital India @ 2025."

Mr Anil Singhvi said, "I believe, FTIL with its world class Talent, Technology, Capital, Infrastructure and Leadership is ideally poised to become the obvious choice as partner for entrepreneurs and organizations, who would rather outsource the services and conserve the resources to scale up their business. I’m excited about the journey ahead and optimist about FTIL Management team’s ability to execute on Founder’s Vision of Digital India @ 2025".

Mr Prashant Desai added to their view saying, "Despite the recent challenges, there is renewed positive energy within all corners of FTIL. The team is confident of its ability and is confident that FT 3.0 will emerge as a unique Indian IT company focused on ‘technology + innovation+ enterprise’ DNA of FTIL and in the process create significant shareholder value. I am very happy to be on the Board."

Subsuming the views and quotations, the metamorphosis of FTIL with the latest FT 3.0 technology complemented their views and space-age vision for FTIL, to enthuse stakeholders with realistic growth that is expected to be exponential in the coming times. 

New rollers of developments at FTIL

The week gone by has brought in new waves of optimism for FTIL. FTIL turned new leaves with a distinct step forward – the expansion of FTIL Board, having inducted industry leaders commanding colossal wealth of experience in the business spectrum. Among the inducted directors were Mr.Anil Singhvi, Mr. Berjis Desai and Mr. Prashant Desai. The former MD and CEO of Ambuja Cement, Anil Singhvi will be part of the Board of Directors along with the founder of the law firm – J Sagar Associates, Mr. Berjis Desai, as non-independent and non-executive directors. The investor relation expert, Mr. Prashant Desai will be on FTIL Board as an executive director.  

Empowering the board with more able hands to ripple FTIL’s progression was, evidently, the core objective. All three of them have hailed as exceedingly successful leaders in their fields of functionality. Their credentials have led numerous organisations to the pinnacle of accomplishments.

Bergis Desai – a law graduate from the Mumbai University and a post-graduate in law from Cambridge University, UK, was the managing partner of J. Sagar Associates, a national law firm, with the strength of over 300 lawyers, since April 2003. He specializes in financial and international business laws and international commercial arbitration. He is also a director of leading companies including The Great Eastern Shipping Company Ltd., Praj Industries Ltd., Emcure Pharmaceuticals Ltd., Edelweiss Financial Services Ltd. and Adani Enterprises Ltd.

Mr. Anil Singhvi, a chartered accountant, is the Chairman of Ican Investments Advisors Pvt. Ltd., with over 30 years of experience in corporate sector, which constitutes 22 years of extensive experience having worked with Ambuja Cements Ltd. where he excelled to the high echelon of MD & CEO. By worthy organic and inorganic strategies, the company grew from less than one million to 20 million tonnes, wherein he played a crucial role in the sale of Ambuja & ACC to Holcim, with a transaction value of over $ 2 billion. His approach was multidimensional, having conceptualised and advised merger of Enam with Axis, a deal that involved about US $ 500 million, and having founded IIAS (Institutional Investor Advisory Services India Ltd.), proxy advisory company for Institutional Investors.

It was a ground-breaking determination for refining corporate governance and accountability of the corporates. IIAS covers over 300 large Indian corporates and advises Investors on the issues of corporate governance and voting. Apart from being Corporate & PE Advisor, he is also on the board of various companies viz. Hindustan Construction Co. Ltd., Capital First Ltd., Subex Ltd, Greatship (India) Ltd., Lavasa Corporation Ltd.

Mr. Prashant Desai commands 20 years of valuable experience, which constitutes 10 years in investor’s relation. He is an associate chartered accountant and ranked 4^th, whilst graduating in cost & work accountant. He founded Seagull IR Solutions Pvt. Ltd., which happens to be one of India’s leading investor relations companies. It has represented numerous companies viz. Financial Technologies (India) Ltd. (FTIL), Pipavav Defense, Phoenix Mills, Talwalkars. Provogue, Prozone CSC, Everstone, Dhunseri Petrochem, DQ Entertainment, Supreme Infrastructure and many more. Before this stint, he headed IR

& Investments at Future Group (Pantaloons Retail, Future Capital Holdings & Future Ventures, Mumbai). He was also head of research at Rare Enterprises, a Rakesh Jhunjhunwala partnership firm, in Mumbai. He was also a board member in Pantaloons, Talwalkars, Future Staples, Future E-Commerce, Pan-India Foods and Industree Crafts. He was President, Mergers & Acquisition and investor Relations at FTIL, since December 2012. He also represents FTIL on the boards of Dubai Gold & Commodity Exchange, Bourse Africa Ltd., Mauritius and Bahrain Financial Exchange, Bahrain.

The new inclusions to the FTIL Board were welcomed by all in FTIL, particularly, by the founder and MD of FTIL – Mr. Jignesh Shah and Mr. Venkat Chary, IAS (Retd), ex-Chairman FMC and Chairman FTIL. 

NSEL-FTIL merger proposal- Standards ruptured. How Satyam case is different from FTIL’s.

Appalling ideas wished-for, to further impose on FTIL! Earlier, it was the proposed idea of NSEL-FTIL merger by Forward Markets Commission, which was subsequently ordered by the Ministry of Corporate Affairs (MCA); then taking possession of FTIL management has been on government’s anvil. Now, is it just getting arms over resources or getting the claws into the healthily operational organisation, for which the activism is being sped up?

“The government owes the nation an explanation as to why and on what grounds the Forward Markets Commission (FMC) has been making these proposals to breach FTIL’s limited liability……..”(Source – EconomicTimes, Oct. 28, 2014. Edit, PageNo.16).

Would there be a tenable reasoning to all that the nation is looking up for. Also, suggests the excerpts of the Economic Times’ edit page titled “Who’s Targeting FTILBreaching all Norms?”It reads as –“It is entirely unwarranted to do a Satyam on FTIL, on the pretext of speeding up the process of recovery from the defaulting traders of NSEL.

The government owes the nation an explanation as to why and on what grounds the Forward Markets Commission(FMC)has been making these proposals to breach FTIL’s limited liability when no wrongdoing or improper pecuniary gain has yet been established against its management and when there are clearly identified defaulters who carried out trades with non-existent underlying stocks and whose obligation to pay is beyond dispute? And why have the ministries of law and corporate affairs been indulging in these patently misconceived demands by the FMC?”

As it has been talked on countless forums that the Economic Offences Wing (EOW) has identified and frozen the assets of the defaulters and a panel has been set up by the Bombay High Court for recovery, what’s the panic to merge and take over all about? But what’s more stroppy is that the hounding actions taken on Satyam are being proposed for FTIL.

Straightforwardly, these are two diverse gears! There are contrasting events in both the cases, thus no parity can be drawn between the two. FTIL’s case cannot be labelled as a corporate scandal.

Here are some contrasting reasons as to how FTIL’s case is far different from Satyam’s, in detail:

Firstly, in the case of Satyam, the promoter had confessed in writing to the regulator of his wrong-doings, whereas there was vehement and consistent denial by the promoter of FTIL, of any wrong-doings whatsoever. The matter of his culpability is sub-judice. Also, the question whether NSEL itself is liable for the trading losses incurred by the 13,000 clients of the brokers who traded on the NSEL platform for higher returns (“Trading Clients”) is currently sub-judice before the Bombay High Court. Hence, the question of FTIL being held liable through piercing the corporate veil does not arise.

Secondly, Satyam’s promoter confessed siphoning-off the company’s funds to his realty firm Maytas infra. Whereas in the case of FTIL, even after 12 months of investigation byEOW, ED and CBI, not a single paisa of the Trading Clients’ money traced eitherto NSEL, Mr. Jignesh Shah or FTIL. On the contrary, the entire money of the Trading Clients (i.e. Rs. 5,500 Crores) has been traced to 22 Defaulters who used that for repaying loans, working capital requirements, real estate and luxury cars. In fact, 85% of the Trading Clients’ money is with just 7 Defaulters. Both the above aspects confirmed by the Bombay High Court’s Order of 22 August 2014 granting bail to Mr. Jignesh Shah.

Thirdly, Satyam’s promoter confessed fudging of books of account of Satyam. But in FTIL’s case, No major irregularities found in the ROC’s inspection of FTIL. FTIL audited by one of the Big-4 accounting firms which has not found any irregularities in FTIL’s accounts so far. Further, no loan defaults by FTIL till date have been found. FTIL was granted licenses to set up exchanges by Indian regulators (such as SEBI, CERC, FMC) and overseas regulators such as Singapore, Dubai, Mauritius, Bahrain etc. after thorough due-diligence and background check of the company and its promoters.

Thus, in the case of Satyam, there was a fraud in the company (i.e. Satyam) itself perpetrated by the promoters who were also in management. Hence, the remedy was to change the management- whereas in the case of FTIL, no fraud has been detected by the courts or investigating agencies. It is a case of payment and settlement defaults at FTIL’s subsidiary NSEL due to the 22 Defaulters failing to honor their pay-in obligations towards NSEL. Hence, the remedy lies in chasing these Defaulters and ensuring recovery of the Trading Clients’ monies from them.

In spite of all that, the actions are planned to be cuffed on FTIL. The sanctity of limited liability is expected to hobble with such actions, and it’s been time and again voiced out by numerous media houses. ‘Coming up good times’, as the colloquial more coined now and then - will it see the times when norms and laws are not violated, and also, the rights and ‘limited liability’ privileges of the investors across-the-board are protected, by even-handed outlook.

NSEL-FTIL merger call likely to create pangs of discontent

Privileges of limited liability emasculated in one blow!

As the course of law is yet to dispose, why did the government propose the merger? Is it some kind of hurry or prejudice? These are the questions raised by several media houses besides the business fraternity. There’s a lobe of hope still flickering as the business community and media guilds resonate their concerns over government’s NSEL-FTIL merger order.

Like the most, one of the excerpts from an article featured in Economic Times on 23^rd October, 2014, reads that, “Merger Violates Limited Liability”; it specifically states –“This kind of governmental activism will not help the traders who are owed money to recover their dues, but will taint India’s record on respecting the basic principle of limited liability. The move will, in all probability, also amount to contempt of court, as the Bombay High Court is already seized of the matter and is in the process of recovering the amount from defaulters.”

Devoid of dispute, the defaulting traders’ blameworthiness has been established! As much veracity lies in the crisis that unfolded, mugging trading clients, there’s as much credibility in the Economic Offences Wing (EOW) of Mumbai Police having identified defaulters and frozen their assets- almost the entire amount. It was further fortified by the committee formed by the Bombay High Court, chaired by a former high court judge, in order to diligently function and initiate money recovery efforts from the defaulters. Thus when the feisty approach can be reflected in redeeming the seized assets, why the government cannot expedite it on priority basis than condoning the importance of limited liability.

“This kind of governmental activism will not help the traders who are owed money to recover their dues, but will taint India’s record on respecting the basic principle of limited liability. The move will, in all probability, also amount to contempt of court, as the Bombay High Court is already seized of the matter and is in the process of recovering the amount from defaulters.”(Source – ET, 23^rd Oct ’14)

Abiding by the law - the proceeds in the court of law happens to be sub-judice, which, in all fairness, is supreme. Also, no linkage of FTIL promoters or the company in neither the whole crisis nor any money trail has been established; therefore, unwavering focus, plausibly, should be on recovery than anything else. So, is it prejudice triggering radical activism of this magnitude? Numerous questions have been raised; predominantly, if FTIL should be substituted for NSEL, and make its investors face the brunt and suchlike. In any circumstance, it is bound to have a cascading effect on the ‘corporate India’, Investments and economy, as a whole. Does it make us ponder over it pensively? 

FINANCIAL TECHNOLOGIES INDUCTS MR. BERJIS DESAI AND MR. ANIL SINGHVI ON ITS BOARD OF DIRECTORS

Link- http://bit.ly/111SFVZ

Unprecedented Shocker - NSEL-FTIL merger

NSEL – FTIL amalgamation is supposed to be an unnerving move for all, juddering establishments and tenets of law - particularly, the Companies Act. Outnumbering excerpts of myriad media releases and stories have been of the view, and have articulately indicated that frequently. 

As one in the Business World editor’s note reads as - “As per the order of the Ministry of Corporate Affairs, NSEL will have to merge with FTIL and lose its existence. As a result, FTIL will have to bear the consequences of the Rs 5,574-crore fraud. The owners of the remaining 55 per cent will also bear the brunt. This goes against the fundamentals of limited liability. The reason so many companies register themselves as ‘limited’ is because shareholder’s liability is limited to the investment in the company.” Most in the business and media realm are crestfallen by the move. Beyond principles, the most startling side is how a limited company can be liable for another company’s liabilities.

Clearly, the shockwave is unprecedented for various reasons. First - the legal proceeds ascertained that there has been no trail of money leading to the promoters of the company. Second - It is also seen as a pre-judgement of Bombay High Court’s order, wherein the case is still being pursued, and the matter is sub-judice. Third - As the whole pursuit has been for recovery of trading clients’ monies, recently a historic order was passed by the Bombay High Court to form a 3-member committee that will determine the assets of the defaulters - this, obviously, came as a reprieve for the trading clients of NSEL. Thus the merger call by the MCA defeats the fundamental edifice of limited liability which is the basic principle of company law; as the law has been laid down to ensure limited liabilities are efficiently and impeccably managed.

“As per the order of the Ministry of Corporate Affairs, NSEL will have to merge with FTIL and lose its existence. As a result, FTIL will have to bear the consequences of the Rs 5,574-crore fraud. The owners of the remaining 55 per cent will also bear the brunt.

This goes against the fundamentals of limited liability. The reason so many companies register themselves as ‘limited’ is because shareholder’s liability is limited to the investment in the company.” (Source –Editor’s Note, Business World)

Experts may be of the opinion that the move may inflate the potential of raising questions at the country’s highest court  - ‘if the law is being abided by’ or being bent based on bureaucrats’ decisions? If yes, then the merit of law perhaps is being subverted out of prejudices. Then, for sure, it can be said as ‘the off beam precedent’ will undermine the sanctity of the ‘limited liability.’ 

FTIL - NSEL Merger – A marring move

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.