Contravention of Limited Liability Concept in FTIL-NSEL Merger

FTIL-NSEL merger is saddening for the markets and shareholders. As the ministry of corporate affairs (MCA) has decided to merge the dependent National Spot Exchange Limited (NSEL) with its parent, Financial Technologies (FTIL) there will be ill-effects of the Merger.

FTIL’s 64,000 shareholders are affected by ministry’s merger decision as it breaking the rule of Limited Liability Concept. It is also hammering the foreign portfolio investors in FTIL, including Government Pension Fund Global and Blackstone GPV Capital, who own almost 13 per cent of the shares of the company. In this case MCA did not considered the flawed use of Section 396 of the Companies Act to push through the merger violates the concept of limited liability, the foundation of modern entrepreneurship. The parent company FTIL should not be ideally responsible for the liabilities of NSEL. It reveals the irregularity in India’s regulatory system.

Ironically ministry has argued the move was in public interest without properly defining the term public and without explaining on whose behalf the merger was being affected. The fact of  the draft merger order, issued in October 2014, was also negligent. Then, the ministry had argued that the draft order was based on a view that there was a prima facie case for invoking the never-before  forced merger rule. In some parts, the ministry has argued that there have been forced mergers, like that of troubled Global Trust Bank with healthy publicly-owned banks and the NSEL-FTIL merger is in continuation with this context. But what the government deliberately ignored the willingness of the same bank in case of merger.

As the case processed ministry doesn’t seemed to be bothered as it has asked FTIL’s shareholders not to object to the merger being equity investment carries inherent investment risk. Merger is ill advised as it has multiple loopholes, apparently because the government has authorized the ongoing process, under supervision by the Bombay HC, to recover dues from the defaulting traders. Even the assets worth Rs.5,800 crore have already been frozen by the Economic Offences Wing of Maharashtra. When they should identify the traders for recovery process. It is also unlikely to stand the test in the courts.

In case of recovery of the investors funds only money came in is from the decrees of defaulters assets. The order resulted in little results and the rest of it will be unfolded with time.

 

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Applicability of MPID Act on NSEL by Bombay HC

The most anticipated judgment that came on Thursday in the NSEL crisis case, where the Bombay High Court had dismissed the plea by Financial Technologies (India) Limited in questioning the applicability of the Maharashtra Protection of Interest of Depositors in Financial Establishment Act (MPID) to the Rs 5,600-crore NSEL payment crisis. This also means the Act will apply on all exchanges in the country.

Bombay High Court

The NSEL Crisis came to light on 31 July 2013, the Economic Offences Wing (EOW) of the Mumbai Police found 13,000 trading clients had invested money in the spot exchange. According to media reports, the petition argued that as the money was not taken for NSEL’s purposes, it couldn’t be considered a deposit. Acceptance of money as a ‘deposit’ is mandatory for levying charges under the MPID law. FTIL had also said the so-called investors had bought commodities and paid tax on that.

Meanwhile, this was the third blow for FTIL in the last two days after HC restrained FTIL from disbursing dividend and pay hikes to the shareholders and its executives respectively. Whereas on Thursday, the Registrars of Companies (RoC) rejected FTIL proposal to change its name to 63 moon Technologies.

“This is a welcome judgment. We hope the properties attached by the EOW and other government agencies will be sold for paying investors’ money. Today’s court order has revived our hope for getting the money back,” said Ketan Shah, founder, NSEL Investors Action Group (NIAG). EOW had attached properties worth Rs 6,000 crore, the valuation being at the time of attachment.

The Bombay High Court completed the hearing on July 8 on this matter and reserved the order which was pronounced on 1st October, 2015.

Mr. Prakash Chaturvedi, Managing Director and Chief Executive Officer of NSEL, said : “We are awaiting the court order and further legal course of action shall be taken after studying the court order. We have full faith in the judicial system of the country and we believe that the truth will prevail.”

Once MPID is made applicable, the existing owners cannot liquidate attached properties. The district collector issues orders to auction these, using the proceeds to pay depositors/investors.

“Now, the government would liquidate the attached property and pay investors’ money,” said Arun Dalmia, Secretary, NSEL Investors Forum.

Jay Bhatia, a legal expert and former counsel of the government of India on NSEL case, said, “The applicability of MPID Act on one exchange will be applicable on all exchanges in the country.”

MCX Slips in Global Rankings of Exchanges

Multi Commodity Exchange of India Ltd (MCX) is an independent commodity exchange based in India. India’s largest commodity exchange, MCX has slipped 14 positions in the past two years in the global ranking of exchanges by US–based Futures Industry Association (FIA). As per FIA, MCX slipped to 24th rank among 53 globally-renowned commodity and equity exchanges in 2014, compared with 10th rank in 2012 and 3rd among global commodity exchanges.

MCX Logo

The reason behind the fall in global ranking signifies, the imposition of a commodity transaction tax ( CTT) on metals and energy futures contracts and select processed farm futures like sugar, soyabean oil, etc last year, amid lacklustre price movement in commodities like gold and silver and the fallout from the NSEL crisis are behind the poor showing this year, according to multiple industry officials and MCX itself.

“CTT was one of the biggest direct factors that seems to have affected trading on MCX,” said a senior government official aware of the development. “Within a month since its imposition turnover on MCX was down a clean 40 per cent.”

While in 2013, the number of contracts traded on MCX fell by 32 per cent to 26.5 crore from a year-ago period, pushing the bourse to the No. 6 rank from No. 3 in 2012. The number of contracts traded on NCDEX declined by 28 per cent to 3.2 crore, pushing it to the ninth slot from No. 8 position a year ago, data from MCX’s fiscal year 2014 report shows. MCX has cited data from FIA, the leading trade organisation for the futures, options and cleared swaps markets worldwide.

“In 2012, MCX was ranked 10th largest derivatives exchange by FIA in their Global Annual Volume Survey report on 4th exchanges which erroneously clubbed volumes of MCX-SX and MCX. In 2014, the FIA report ranked MCX as the 2largest derivatives exchange. The fall in volume on MCX is attributed to imposition of CTT effective July 1, 2013,” said an MCX spokesperson.

The previous management had laid a vision to get MCX on top in global ranking with an average daily turnover of closed to Rs 100,000 crore in the next few years. The sheen has now gone off commodity markets and the average turnover, the number of brokers and new product launch have taken a hit in the past two years, experts say.

Jagmohan Dalmiya – The Man Who Fated Indian Cricket

BCCI president Jagmohan Dalmiya, who passed away late on Sunday night (i.e. 20th September, 2015), Prime Minister Narendra Modi and President Pranab Mukherjee condoled the death of the cricket administrator. The condolences paid by cricket fraternity from Sourav Ganguly, Sachin Tendulkar, Rohit Sharma, Shikhar Dhawan to VVS Laxman, everyone mourned the death of the veteran cricket administrator. On tragic demise of Mr.Dalmiya, even the cricket world pay their tributes to the one of the greatest administrator of cricket through Twitter, terming it a huge loss for the game of cricket.

Jagmohan Dalmiya

Jagmohan Dalmiya was an Indian cricket administrator and businessman from the city of Kolkata. He headed the ICC between 1997 and 2000, and was the President of the Board of Control for Cricket in India (BCCI) and Cricket Association of Bengal (CAB). He played a pivotal role in recognising and unlocking cricket’s commercial potential in India and around the world during his 36 years career. He was often considered the “man who made cricket a global sport“.

Jagmohan Dalmiya 1

Dalmiya’s Masterstroke and TV Rebellion in India

  • Mr. Dalmiya’s biggest gift to Indian cricket was to strike a multi-million television deal with World Tel in the early 90’s that went a long way in making BCCI the richest cricketing body in the world.
  • Dalmiya was the brain behind India co-hosting the Reliance World Cup in 1987 and then the Wills World Cup in 1996.
  • He along with friend turned foe, Inderjit Singh Bindra also defeated the England and Australian block to win the bid for co-hosting 1996 edition in India, Pakistan and Sri Lanka.

Since then, there was no stopping the man from Kolkata’s New Alipore. He was virtually a ‘One Man Show‘ for the next 15 years in the cricket board.

Jagmohan Dalmiya - One Man Show

Key Highlights of Jagmohan Dalmiya 

  • Jagmohan Dalmiya was elected as the President of the ICC in 1997 and held office for three years.
  • Mr. Dalmiya was also elected as the President of the BCCI in 2001.
  • Was involved in a major row with the ICC, after its referee Mike Denness found Sachin Tendulkar guilty of technical breach of rules and fined him after the Port Elizabeth Test against South Africa in 2001.
  • Virendra Sehwag too got a one-Test ban for excessive appealing. Dalmiya forced the South Africa Board to prevent Denness from officiating the last Test.
  • Dalmiya’s casting vote helped Ranbir Singh Mahendra win as BCCI president in 2004.
  • In 2006, Mr. Dalmiya was expelled from the board for alleged misappropriation of funds and for refusing to provide certain documents.
  • In May 2007, Dalmiya challenged the decision in the Bombay High Court and then in the Supreme Court. He was exonerated after the BCCI couldn’t prove their charges.
  • The Calcutta High Court too suspended his expulsion, allowing Dalmiya to contest the 2008 CAB (Cricket Association of Bengal ) elections, which he won. The BCCI revoked Dalmiya’s expulsion in 2010 after he withdrew a civil suit against the board.
  • In June 2013, he was appointed BCCI interim president after N Srinivasan stepped aside till the probe into IPL spot-fixing case involving his son-in-law was complete.
  • On 2nd March, 2015 Dalmiya returned as BCCI president after a 10-year gap replacing N Srinivasan.

Jagmohan Dalmiya CAB Felicitation

Mr. Dalmiya’s contribution towards World Cricket cannot be quantified. Jagmohan Dalmiya, was the “man who made India the epicentre of world cricket“.

Cricketers Second Innings Off The Field

There is always a second innings to be played by each and every person. Most of the cricketers after having a successful first inning in domestic cricket as well in international career had commenced their second innings off the field. Let’s have a look on what these cricketers made out off their life after their retirement.

Second Innings

Jonty Rhodes

At 42, a still-very-blonde, very fit Jonty Rhodes looks ten years younger. In 2008, he started 10 Chapters with United Vintners, the wine arm of United Breweries to import South African wines to India. In 2009, he brought wind turbines from Scotland to South Africa. Unfortunately for Rhodes, both ventures bombed.

ESN

Now, Rhodes in partnership with Mumbai’s Aatikaay Narula has started supplement business in India. Aatikaay Narula has been in the business of health supplements for the past six years. Their venture, Evolution Sports Nutrition (ESN), is a range of nutrition and wellness supplement products for middle class people. He and Rhodes hold almost equal stakes in the company and while Rhodes is on the board of directors, Narula is the CEO.

Mahela Jayawardene and Kumar Sangakkara

Mahela Jayawardene and Kumar Sangakkara are the Jai-Veeru of cricket as their partnership transcends the field of play. The strong bond of friendship off the field resulted into an altogether new venture, when they partnered with renowned chef Dharshan Munise started the “Ministry of Crab” in Colombo.

Ministry of Crab

As the name suggests, the restaurant focuses on seafood, particularly crabs. The restaurant’s website is attractive and classy, almost as if the two batting geniuses have invoked their artistry off the field.

Sachin Tendulkar

The ‘little master’, as many like to call him, is an avid foodie and has a deep connection with food. Tendulkar had opened two restaurants: Tendulkar’s in Colaba (Mumbai) and Sachin’s in (Mulund) Mumbai and Bangalore.

Tendulkars

The batting maestro owned these restaurants in partnership with Sanjay Narang of Mars Restaurants. The restaurants sported decor that he chose and conceptualized and the food that was on the menu was the food he has always loved very much himself. Unfortunately, due to poor response from consumers “Sachin’s” got shut down in 2005 and two years after that in 2007 “Tendulkar’s” was shut down for the same reason.

Steve Waugh

Former Australian cricketer Steve Waugh is all set to make a mark in Indian real estate. Waugh has set a property platform specifically for Non Resident Indians (NRIs) looking to buy properties in India. Waugh Global Realty has entered the domestic real estate market by launching a portal that will cater to the housing demands of NRIs.

Waugh Global Realty

The company currently has 91 properties listed on its portal of 10 developers across seven cities — Delhi NCR, Mumbai, Pune, Hyderabad, Bengaluru, Chennai and Kolkata. Waugh Global has partnered with leading developers like the Lodha Group, Godrej, Shapoorji, K Raheja, Kalpataru, Kolte Patil and Sobha Developers among others.

As they had a remarkable career on the field, hope they would make a similar impact off the field.

India’s Icarus

Today I came across an interesting article posted on India Legal Online by Shantanu Guha Ray, where he has detailed “The systemic targeting of FTIL, leading to its downfall.”

Excerpts:

Jignesh Shah blazed like a meteor and burnt out like one. This entrepreneur, who could have been a sterling exponent of Prime Minister Narendra Modi’s “Make in India” program, aimed to take commodities trading online and took on institutional forces such as the National Stock Exchange (NSE). However, in a surprising twist of fate, he was done in by challengers and arrested on May 7, 2014.

It all started in 1988 when Shah started Financial Technologies India Limited (FTIL) and two commodity exchanges — MCX (Asia’s second largest) and National Spot Exchange Limited (NSEL), which was India’s first electronic spot exchange. He began trading in 2008 and did so well that he set up exchanges in Singapore, Bahrain, Dubai, Mauritius and Botswana.

Problems started when MCX decided to take on the NSE-promoted commodity exchange — NCDEX, a competitor — thereby challenging the primacy of NSE. A bureaucrat even expressed concerns at the declining market share of NCDEX in comparison to MCX, suggesting that this raised suspicions that NSE and its subsidiaries were under government protection and patronage.

Meanwhile, NSEL too did very well. But irregularities were found in it and in 2013, a payment crisis hit it, leading to the eventual loss of 5,689.95 crore for investors and Shah’s arrest. However, on August 22, 2014, Shah got bail from the Bombay High Court after three months in custody. There is now a move to merge NSEL with FTIL so that the resources of FTIL can be used for settling the liability. So how did the entrepreneur, who was once in charge of BSE’s online trading, get embroiled in this mess? Has the Economic Offence Wing (EOW) of Mumbai Police been able to find any money trail against FTIL or Shah?

To read the complete article, check the following link.