And
so the FTIL saga continues. In the latest edition, another salvo was fired by
the government against FTIL. In the most recent attempt to annihilate FTIL’s existence
as an independent business enterprise, the Ministry of Corporate Affairs (MCA)
in a petition to Company Law Board (CLB) had sought to supersede Financial
Technologies (India) Ltd. (FTIL)’s current board under Sections 397, 398 read
with Section 388 (B) and 388 (C) 401, 402, 403, 406 and 408.
No
doubt the government has immense power to rein in errant and unlawful actions
of companies. FTIL, an independent company, cannot and should not be punished
when all the matters are sub-judice.
In
any case, from all angles, the decision of MCA to file an instant company
petition on March 3 with CLB is nothing short of browbeating the company into
submission. More so as it comes just three days before the time given to FTIL
to file its objections to the draft amalgamation of NSEL with FTIL on grounds
of “public interest” in which 63,000 shareholders and other stakeholders’
interests were not considered at all.
The
matter also has legal ramification for all companies incorporated and
conducting business in the country. The central government is attempting to
render FTIL’s challenge to Section 396 nugatory by attempting to remove the
existing Board of FTIL.
Was
MCA’s petition an attempt to stop FTIL from filing its objections to the draft merger
order as granted by the Hon’ble Bombay High Court on February 4?
The
main arguments used by MCA in its petition to CLB are wrong and should not be
used to overturn the legally elected Board of Directors of FTIL.
The MCA says FTIL’s
current Board opposes the amalgamation of National Spot Exchange (NSEL) with
FTIL.
The reality:
For
the current Board, its fiduciary responsibility toward the 63,000 shareholders and
other stakeholders of the company, including employees, is of paramount
importance. In any civilized country governed by the covenants of business law,
this is the practice.
Also,
the use of “essential public interest” as a ground by MCA to propose the amalgamation
of NSEL with FTIL is sub-judice.
The MCA further says
that the current Board of Directors facilitated the sale of MCX at a loss of
Rs. 290 crore and should be overthrown.
The reality:
.As
for sale of FTIL’s stake in MCX, the divestment was conducted in an independent
and transparent manner. J M Finance was appointed as the financial advisor for
the stake sale in March 2014. Interested companies were invited to bid. Among the
reputed companies that showed interest in the stake sale were Reliance Capital,
Chicago Mercantile Exchange (CME), Tata Capital, Kotak, Warburg Pincus and
London Metal Exchange.
There
were numerous letters from MCX insisting that FTIL divest its shares in a short
time. Those letters stated that the regulator, i.e., Forward Markets Commission
(FMC) would not permit launch of any new contracts by MCX unless there is
compliance with the divestment.
It
was FMC, through its various directives, including the not “fit and proper” person
to continue to hold 2% or more paid-up capital in MCX
order that forced FTIL to exit MCX and the same was confirmed by MCA in its
Petition.
The
interests of the shareholders and other stakeholders of FTIL were of paramount
importance for the Board of Directors, which acted in a transparent manner to
derive the appropriate value for the divestment in the relevant market and
regulatory conditions.
It is unlawful and wrong
of MCA to supersede the
Board of Directors of FTIL. It is also unprecedented in the history of
corporate India and will set a wrong example for future business entrepreneurs
and lawmakers.
