FTIL-NSEL merger aims to get back money of investors

Jignesh Shah-led Financial Technologies (India) Limited (FTIL) might have to absorb huge liabilities, including more than Rs 5,200-crore payment dues, to clean up the mess at National Spot Exchange Limited (NSEL) after the corporate affairs ministry ordered the trading software provider on Tuesday to merge itself with the scam-hit bourse.

The order, which aims to get back investors' money using resources of the Group, hammered the FTIL scrip, which lost 20 per cent to hit its lowest permissible level of Rs 169.65 on Bombay Stock Exchange.

This is the first time that the ministry has ordered a 'forced merger' of private entities under the Companies Act. "The decision has been taken in essential public interest as the exchange is not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues," the order stated.

"In the face of a fraud of such a magnitude involving settlement crises of Rs 5,600 crore owed to over 13,000 investors on the trading platforms of NSEL, FTIL cannot seek to take refuge behind the corporate so as to unjustifiably isolate itself from the fraudulent actions that took place at NSEL resulting in such a huge payment crisis," the order further stated.

In a brief statement, FTIL said that it has received a communication from the government on this draft order and is taking appropriate steps in the matter in consultation with the legal counsel of the company.

The move - the first major government intervention in a scam hit private sector entity since the Satyam case in 2009 - would take a final shape after taking into account submissions or objections made by shareholders and creditors of the two companies.

Post merger, NSEL's entire business, properties and liabilities, among others, will get transferred to FTIL. As on March 31, 2013, NSEL had a net worth of Rs 175.76 crore. "The members of the two companies, its creditors may provide suggestions/objections within a period of 60 days," the ministry said.

TWO HONCHOS ARRESTED

>> The Mumbai Police arrested two top honchos of different defaulting companies which collectively owe over Rs 1,000 crore to NSEL on Tuesday.

>> Gagan Suri, one of the directors of Yathuri Associates, was apprehended from Chandigarh while Ranjeev Agarwal, promoter of PD Agro Processors, was picked up from Karnal, Haryana.

>> Suri's company owes Rs 424 crore while Agarwal defaulted about Rs 644 crore to NSEL.