The Supreme Court on Tuesday set aside the Centre's decision to merge National Spot Exchange Ltd (NSEL) with Financial Technologies India Ltd (FTIL), which is now known as 63 Moon Technologies Ltd.
A bench comprising justices R F Nariman and Vineet Saran delivered the judgement on a batch of petitions filed by 63 Moon Technologies Ltd challenging the Bombay High Court's December 2017 verdict upholding the Centre's decision to merge NSEL with FTIL.
In February 2016, the Centre had passed a final amalgamation order in terms of the provision of the Companies Act merging FTIL and NSEL. As per the order, all the assets and liabilities of NSEL would become assets and liabilities of FTIL.
The government's order was challenged in the high court which dismissed the petition in December 2017.
In its judgement, the apex court held that the Centre's February 2016 order was "ultra vires" to section 396 of the Companies Act and was also violative of Article 14 (equality before law) of the Constitution.
"In conclusion, though other wide-ranging arguments were made with respect to the validity of the Central Government amalgamation order, we have not addressed the same as we have held that the order dated February 12, 2016, is ultra vires Section 396 of the Companies Act, and violative of Article 14 of the Constitution of India for the reasons stated by us hereinabove," the bench said.
"The appeals are accordingly allowed, and the impugned judgment of the Bombay High Court is set aside," the apex court said.
The bench held that the merger of NSEL and FTIL did not satisfy the criteria of "public interest".
"Thus, it is clear that no reasonable body of persons properly instructed in law could possibly hold, on the facts of this case, that compulsory amalgamation between FTIL and NSEL would be in public interest," the bench noted.
After the apex court's verdict, Jignesh Shah, chairman emeritus and mentor of 63 Moons Technologies Ltd, said in a press statement, "We have always had full faith in the Indian judiciary and our courts. Finally, truth has prevailed."
NSEL had shut down in 2013 after a major payment default and it was ordered not to enter into any fresh contracts by Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI).
On July 31, 2013, NSEL, then 99.99 per cent subsidiary of FTIL, had defaulted in nearly Rs 5,600 crore payments to its around 13,000 investors.
After the crisis, the Ministry of Corporate Affairs (MCA) had decided to issue a final order for the merger of NSEL with FTIL under section 396 of the Companies Act, 1956.
In February 2016, the MCA had passed a final order directing the merger of scam-hit NSEL with FTIL.
FTIL, promoted by Jignesh Shah, is the parent company of NSEL with 99 per cent shareholding.