The forced merger proposed by MCA in the draft proposal on 63 moons is the first in history of Corporate India. Nobody likes anything forced on them, especially if it is unwarranted, and in this particular FTIL– NSEL merger, it is also about the fact that the proposal reeks of violations.
To begin with, section 396 of the Companies act, 1956, violates article 14 of the constitution on executive overreach. It becomes important to note here that there are no guidelines for the exercise of this power by the central government and that this decision erodes the net worth of 63 moons technologies limited and makes the company commercially unviable - a direct violation of the shareholders’ fundamental right to carry on business under Article 19(1)(g) of the constitution. To add on, a non-consensual merger of two private entities is deemed discriminatory. It even goes against MCA’s own circular dated April 20, 2011 according to which consent of 100% shareholders and 90% creditors needs to be obtained for a merger to take place. As much as even an opportunity was not provided to the stakeholders or creditors of NSEL or 63 moons and this by the way is a violation of article 14 of the constitution once again. Apart from this, the merger does not make sense on two more counts First, it does not create any value for shareholders; in fact it leaves them in the lurch. Second, if it is not the shareholders, then what is MCA talking about when it mentions ‘public interest’? How can there be a greater public interest than that of over 63,000 shareholders who gain nothing from this merger except a liability of 5,600 crore? Well, no answers are forthcoming A clear blow to the concept of limited liability and corporate veiling, as the rationale behind the Government’s move only raises more questions than answers. As the world watches India on how we treat our private sector, it is a key opportunity to send out the right message to the global as well as Indian investors. So, will the Government set the right precedent? Reference:http://www.nationalspotexchange.com/Truth_About_NSEL.htm
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September 2020
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