Overwhelming support for FTIL - Shareholders object to merger strongly

At the foreground, responses and objections, particularly, against the merger, zoom past everything else currently. As the proposed idea of amalgamation of NSEL with FTIL sprung up lately, support for FTIL, against the government’s decision to do so has been scampering in boundless and humongous volumes across the social media. Albeit the severity ratcheted enormously, nothing obviated the views, ideas and opinions from deluging the social media spouts indiscriminately.

Pained by extreme throes, shareholders have inundated several media platforms with their overwhelming responses against the proposed merger by the Ministry of Corporate Affairs (MCA). Definitely not a rumpus, but a disciplined swarm of views of shareholders, creditors and employees flocked the board, objecting to the proposed amalgamation.

Subsequent to FTIL management’s urge to vote on the government’s proposal - as per the records, close to 99.55% of the shareholders of the company voiced against the idea of merger, which translates into 18,700 shareholders; these shareholders also represent 79.5% of the equity capital in the company. Supplementing their votes, were the votes of the company’s creditors, 1000 employees and the board of directors, according to the news reported by Business Standard on March 10, 2015.  

“The merger proposal is detrimental to the interest of 63,000 shareholders and over 1,000 employees of FTIL. Nearly 80 per cent of our shareholding and a majority of other stake holders have clearly indicated they are against the proposed amalgamation in the name of public interest of trading clients of NSEL...….”

It was also stated by FTIL that the fallout of votes were computed; the shareholders emailed their responses to the MCA, marking a copy to FTIL, coinciding with the final date of the voting deadline stipulated by the high court; the responses were verified by competent bodies viz. KDS & Co. and an independent auditor, the report further stated.

Spread across 26 states, 5 union territories and 12 nations, the 18,700 shareholders took the baton of responsibility and initiative of voicing their views and responses, in order to make them heard by the law dispensing authorities and judiciary, at large. The exercise of monitoring was, supposedly, to prevent the responses from frittering away from people’s attention and the media, as they may be substantially crucial in making the authorities take cognizance of FTIL shareholders’, creditors’ and employees’ interests and concerns at stake.

It was also observed that the suggestions, concerns and objections on the draft order of the proposed merger inexorably persisted and continued to flow in, besides the ones that couldn’t get through due to mailbox getting filled up by the flooding mails. As per the company’s record, roughly 12,500 e-mails bounced back; thus the hard copies of those were sent to the MCA, in the form of a CD (compact disc), ensuring no response, email or objection is left unnoticed, unread and unheeded.

On the occasion, Venkat Chary, Chairman, FTIL, reacted, saying, “The merger proposal is detrimental to the interest of 63,000 shareholders and over 1,000 employees of FTIL. Nearly 80 per cent of our shareholding and a majority of other stake holders have clearly indicated they are against the proposed amalgamation in the name of public interest of trading clients of NSEL. While the recent report clearly questions the genuineness of 13,000 numbers of trading clients coupled with entitlement thereof, whereas the approximate 80% shareholding are real investors with complete know your client (KYC) bonafide owners of the Company who have objected to the amalgamation and have expressed solidarity and faith in the Company and its management.”

In all fair-mindedness, with no prejudice whatsoever, the spate of responses is believed to impact the happenings positively; though not eerily dishevel the process, but make the authorities believe in FTIL’s healthy existence, and re-emphasise the phenomenon and sanctity of “Limited Liability” beyond anything that may be misperceived and misarticulated to be irking and slovenly, in the whole episode.

(Source - http://www.business-standard.com/article/markets/majority-of-ftil-shareholders-objects-to-nsels-amalgamation-with-it-115031000984_1.html) 

FTIL puts firm foot down - FTIL challenges MCA’s petition firmly; Court stays MCA’s petition till March 11 which has been further extended till March 16

At the outset, embattled state of affairs can be dispelled with rectitude and mettle. FTIL toughly rebutted the Ministry of Corporate Affairs’ petition seeking supersession of the present board of directors of FTIL. Also, the Company Law Board (CLB) hearing that was to take place on 3^rd March, 2015, was stayed a day before, stating that it would be heard by the court on 4^th March, 2015, and no action will be initiated until then, according to the news reported by Business Standard on 2^nd March, 2015.

Further developments ensued, when the hearing took place before the court on 4^th March, 2015; the court adjourned the hearing till 11^th March, 2015 which has been further extended till March 16. In other words, the hearing for the petition filed by FTIL to stop the elimination of its board of directors, making FMC a party, will be heard on 16^th March, 2015. 

On 1^st March, 2015, Sunday, in the FT board meeting, a resolution was passed to oppose MCA’s petition to CLB seeking supersession of FTIL board strongly, terming it to be a clear attempt by MCA to render ineffective approach, and actually overthrow FTIL’s challenge and opposition to the proposed amalgamation of NSEL with FTIL.

“After considering on the matter and also considering that the issue is totally prejudice, mala-fide and not in the interest of FTIL its Board, its employees, its shareholders and other stake holders, we have decided to contest all issues raised by Union Of India vigorously as per the law of the land.”

Also, in the meeting, it was made clear that the material act of the new board since their joining has been its resolve to oppose the draft order and the proposed forced amalgamation by MCA, alluding such allegations of ‘mismanagement’ to be seemingly mala-fide and deserve to be challenged.

On the occasion, Mr.Venkat Chary, acting Chairman, FTIL, said, “After considering on the matter and also considering that the issue is totally prejudice, mala-fide and not in the interest of FTIL its Board, its employees, its shareholders and other stake holders, we have decided to contest all issues raised by Union Of India vigorously as per the law of the land.” He further added that as the Board is competent enough to deal with the current situation, the company will file a petition before the Honourable Bombay High Court or the Company Law Board or at any other appropriate forum as it deems fit.

In the meeting, It was further resolved that it is inequitable to seek replacement of the entire board since four legal suits are sub judice, which includes the representative suit, fit and proper and writ petition filed opposing amalgamation of NSEL with FTIL, as per the FTIL’s press note published on BSE website on 2^nd March, 2015.

FT also added in their press note that the board strongly believes that it has acted prudently in the larger interest of over 63000 shareholders.

It was further stated by the court that FTIL and its lenders are yet to file a reply to the MCA by 4^th March, 2015, stating why the NSEL-FTIL merger should not take place. FT has endeavoured to ply forward with grit to whittle out a trajectory, to legitimately protect the interests of all the shareholders, employees and other stakeholders.

Now, as per the latest developments that took place on 4^th March, 2015, the stay is retained by the court till 11^th March, 2015; the objective is to restrain the government, and seek reply from the ministry of corporate affairs.

 (Source 1 – 1. http://www.business-standard.com/article/markets/ftil-opposes-mca-s-petition-to-clb-for-removal-of-ftil-board-in-court-115030200113_1.html

2.  http://www.bseindia.com/xml-data/corpfiling/AttachLive/Financial_Technologies_(India)_Ltd_020315.pdf

3. http://www.business-standard.com/article/companies/hc-extends-stay-on-ftil-board-s-supersession-for-a-week-115030400890_1.html) 

Status Quo on Merger vacated – expected to imperil several stakes in one go

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)

(Source - http://www.business-standard.com/article/companies/bombay-hc-vacates-status-quo-order-on-ftil-nsel-merger-115020401320_1.html) 

Extended to yet ‘Next’ – NSEL - FTIL merger proceeds will stay as is where is - till Feb 4.

Status quo continues. Bombay HC has extended the stay on government’s NSEL-FTIL merger order till 4 February, 2015.

Perhaps new hopes elevated; the position is still as it is where it was; if it will mark a sublime beginning of the conclusion, is the question. Contrary to the unanimous views that emanated from a vast majority of the business fraternity and media spigots, the government has been steadfast in calling for an unwarranted merger of NSEL with FTIL, on 23 October, 2014. This caused a maelstrom of happenings all over, quaking business moorings and economy at large.

As scheduled, the hearing took place on 22 December, 2014, before Justice VM Kanade. The NSEL Investors Forum (NIF) was issued a notice for contempt of court; as the said forum had made allegations against the said Justice that he could be biased as his son had appeared for a nominee director of PD Agroprocessors, who is one of the defaulters in NSEL.

Who’s to judge whose integrity? Has faith in the judiciary among people dwindled, or is it just prejudicing to doubt eminence? But to affirm that justice is alive and omnipotent, the faith of both Forward Markets Commission’s (FMC) and Ministry of Corporate Affair’s (MCA) counsels in the judge was evident and audible in the court. They confirmed their acquiescence to it, reflecting their conviction and trust when they were asked if they had any objection, by the judge offering to recuse himself, if they had any.

On previous hearings, FTIL’s counsel Abhishek Manu Singhvi contended saying that the draft order for the amalgamation was issued under section 396 of the Companies Act and extended his argument stating that the merger needs to be approved by the boards of both the companies in question, along with the approval of ROC and Official Liquidator’s (OL) nod.

With hindsight, it was a recommendation by FMC and the department of economic affairs that triggered a shockwave which was followed by the government’s draft order for merger. The aim maybe to haste the merger, but it is, as debated all over, bound to dilapidate the scene adversely, and it is inimical for the economy and entrepreneurial growth at large. FTIL’s argument has been that the uncalled-for amalgamation will unavoidably transfer the default of NSEL to FTIL.

The fallout will prove to be "wet blanket" resulting in haplessness, plaguing the scene with waning interest among existing stakeholders, employees of the parent company, besides dismaying new investors across-the-board.  

Proceeds pushed for next – Bombay HC adjourns NSEL-FTIL merger hearing

FTIL’s quest for pivots to save numerous stakes has been a determined effort. The Bombay Court, on 27 November, 2014, adjourned the NSEL-FTIL merger issue till 22 December, 2014. The merger draft order came as a stinker from the Ministry of Corporate Affairs (MCA) on 22^nd October, 2014, which was swilled by many from the business community and several of the media mouth pieces and vents ever since, calling it unwarranted and uncalled for. The swarming views were - the pragmatic shortcomings from the amalgamation will wear away the fundamentals of limited liability; it may also affect the corporate business moorings adversely, apart from discouraging new and enthusiastic investors and traders. In entirety, it may be detrimental to the economy as a whole.  

Apparently, the adjournment, if construed specifically, means the hearing has been deferred till 22 December, 2014; momentarily, it can be seen as the idea is devoid of enough reasoning, as the basis of Article 396 and ‘public interest’ nomenclature can’t be held to be entirely realising. Thus no parity can be drawn in this case. Also, as per a former argument by Abhishek Manu Singhvi, counsel for FTIL, at Supreme Court, section 396 of the Companies Act, 1956, has been exercised, with a thoroughgoing approach, maximum four times, on government companies – that too, with their consent. While in this case, the rummage for expedited merger implementation is on two private companies; needless to say, without their consent, which is unprecedented. Implicitly, the motive seems to be ‘hurried implementation’, which, as per several views and reviews, will emasculate the sanctity of limited liability, affecting the interests of stakeholders, viz. employees and shareholders of FTIL, largely. Therefore, it hasn’t been taken in good taste, for the most part.

It’s been a dour demeanour of FTIL; at first, challenging government’s order for merger of NSEL with FTIL. Then tenaciously striding ahead to protect the sanctity of ‘limited liability.’ Earlier, FTIL had moved Bombay HC against the government’s order. Vehemently put by FTIL, against several arguments – the matter is currently sub-judice before the Bombay HC; thus liability through piercing the corporate veil does not arise.

Myriad voices and arguments against the order were put forward by the business community as well as the media fraternity, to galvanise the matter to reach the authoritative and law dispensing ears. Their objective, seemingly, was to converge fortitudes of the stakeholders, future investors and entrepreneurs at large.

As per the excerpts, mentioned in quotes in the news edit of Economic Times, on 13^th Nov., 2014, reads – “The issue of lifting the corporate veil is, thus, already sub-judice before this court. The petitioners crave leave to refer to and rely upon the papers and proceedings, including various interlocutory applications and orders passed by this Hon-'ble Court, in the said suits."

Now, FTIL is all the more determined to protect the interests of the corporate India, along with those of 60,000 shareholders and 1000 employees. On 21^st October, 2014, questions have been raised on the Ministry Corporate Affairs’ impugned order of enforced amalgamation of the crisis-hit NSEL with FTIL. FTIL solicited in the petition that the government’s order was “bad in law and needs to be quashed.”