www.ftindia.com/A pioneer in FinTech innovations, Jignesh Shah’s company, 63 moons (formerly FTIL) was acclaimed of introducing end-to-end solutions that support high-density transactions since its inception in 1995. It has created state of the art, modern and people centric financial markets. Each and every endeavor of the group was visionary and forward looking to make India a leading technology powerhouse.
CREATING “THE BRAND”
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While the Ministry of Corporate Affairs (MCA) is actively considering merger of the National Spot Exchange Ltd (NSEL) with its listed parent 63 moons, one really wants to know the actual reason and need for such a decision.
The merger shall result into making NSEL and 63 moons as one single entity wherein all the assets and liabilities of NSEL will become assets and liabilities of the resulting company. This is not the first instance when biased and decisions by the government have affected corporate houses in India. An earlier instance on ban of Maggi is still fresh. The Food Safety and Standards Authority of India (FSSAI) had banned Maggi noodles in June 2015 alleging unfair trade practices, false labeling, and misleading advertisements by Nestle India. The ban was in accordance to tests and results depicting that Maggi noodles contained lead and Monosodium glutamate (MSG) in excess of permitted levels, which allegedly harmed consumers. While the ban was later lifted by the Bombay High Court saying the national food regulator had acted in an “arbitrary” manner and not followed the “principles of natural justice” while banning the product. Nestle India had, too, argued that the government was biased and had “singled out” the Swiss food maker by banning their popular snack while no action was being taken against manufacturers of similar products. 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 When the payment discrepancies were traced back to the defaulters, who are the real culprits for causing the payment default, they were never once investigated. Furthermore, there was no action on them for funding or harbouring benami transactions. The fiscal jurisprudence led to the payment problem and yet there was no reasonable action taken against the defaulters. Instead, FMC focused its sights on making National Stock Exchange Limited the primary target. Not only this, they extended their punitive actions against even the parent company, 63 moons, even though it was in no way connected with the trading of National Stock Exchange Limited.
The news that FMC didn’t really take the regulatory responsibilities of the entrusted task of spot market seriously and allegedly performed hurried audits, resulted in punitive actions against National Stock Exchange Limited. So instead of taking a measured approach against contributing maximum efforts for recovery of claims or extending support to the resolution process, there was no thorough investigation which led to payment default recovery process come to a standstill. Though NSEL argued for an immediate action against defaulters, once the entire default money was traced to them, and yet there was no concrete investigation against them which leaves a big question mark whether the affected National Stock Exchange Limited trading clients will ever get justice. Reference:http://www.nationalspotexchange.com/Truth_About_NSEL.htm The Enforcement Directorate had filed a complaint against Jignesh Shah and 67 others.
The court had begun the due process of law and also issued summons to the accused including Mr Jignesh Shah.
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