The government has decided to merge National Spot Exchange Ltd, which is embroiled in a Rs 5,600-crore (Rs 56-billion) payment crisis, with its holding group Financial Technologies.
The crisis-hit NSEL is promoted by Jignesh Shah-led Financial Technologies (India) Ltd.
Issuing a draft order for the proposed merger, the government on Tuesday said the move has been decided upon in ‘public interest’.
"The central government has decided on the merger of NSEL with its holding company FTIL, in public interest under Section 396 of the Companies Act, 1956," the Corporate Affairs Ministry said.
Further, the government has sought comments from members of the two companies as well as the creditors on the draft order.
"All due procedures in this regard shall be followed. The members of the two companies, its creditors may provide suggestions/objections within a period of 60 days," the ministry said.
The ministry has the responsibility of implementing the companies law.
According to the draft order, FTIL has not furnished any explanation as to what steps have been taken by NSEL or by FTIL itself as a parent company to honour the commitment of assuring safety and risk free trading to the members and clients of the exchange.
NSEL is not having the resources, financial or human, or the organisational capability to successfully recover the dues pending for over a year, the order said.
"Further, NSEL is not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues," it said.
"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 said.
Recently, Forward Markets Commission had suggested the merger of the spot exchange with its promoter FTIL for speedy recovery of dues from defaulters.
