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Govt to amalgamate NSEL with Financial Technologies
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SME Times News Bureau | 22 Oct, 2014
The central government Tuesday
decided to amalgamate NSEL with its parent Financial Technologies
(India) Ltd. (FTIL) to secure the interests of about 13,000 investors of
the Rs.5,600-crore fraud-hit company.
The government has issued a
draft order of amalgamation in public interest under section 396 of the
Companies Act and has called for suggestions and objections from FTIL,
National Spot Exchange Ltd. (NSEL), shareholders, creditors and others
within 60 days.
In a filing with the stock exchange, FTIL said it
is taking appropriate steps in the matter in consultation with its
legal counsel.
According to the draft order, FTIL holds 99.9 percent of the Rs.45-crore share capital of NSEL.
NSEL has a net worth of Rs.175.76 crore as on March 31, 2013 while the net worth of FTIL as on that date is Rs.2,712.45 crore.
NSEL is a spot-trading exchange for agricultural commodities.
As
regards the background for the amalgamation proposal, the government
said a payment crisis to the tune of Rs.5,600 crore arose, affecting
about 13,000 investors following NSEL's July 2013 decision to suspended
trading and to merge delivery and settlement of all contracts and differ
them for 15 days.
According to the central government, NSEL
cannot be said to be independent of FTIL as it is effectively the only
shareholder and controls the composition of the former's Board of
Directors.
FTIL's promoter and chairman-cum-managing director Jignesh Shah has been on the board of NSEL and is also its vice chairman.
The
government said crucial observations of NSEL's internal auditor on
higher risk of credit default, insufficient stock of commodities at
warehouses, favour shown to defaulting members, misutilisation of margin
money and others were known to the company's Board.
The FTIL is also aware of such happenings in NSEL, the government said.
The
government said FTIL cannot shy away from its role and duty as a parent
company to take care and exercise prudence in management and governance
of its subsidiary. The parent company cannot hide behind the corporate
veil and isolate itself from the fraudulent actions of its subsidiary.
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