NSEL fraud: Govt mulls revamp of FTIL board

By PTI
27 October, 2014

As it tries to recover investors’ money in Rs 5,600-crore NSEL fraud, the government is considering a proposal to revamp the board of the crisis-hit exchange’s parent firm, Financial Technologies (FTIL).

The Corporate Affairs Ministry, which last week ordered merger of National Spot Exchange (NSEL) with FTIL, will also soon begin an exercise to re-assess the compensation amounts due to be paid to over 13,000 investors at NSEL.

Sources said the government is looking at the possibility of replacing the FTIL board, either fully or partially, to fast-track the recovery process and the subsequent repayment to the aggrieved investors.

These proposals are being considered after taking into account suggestions made by the commodity sector regulator FMC (Forward Markets Commission) and other government departments, sources said, but did not share further details.

This is the first time that the Ministry has invoked a clause in the Companies Act for a forced merger in the private sector due to “public interest”, while a takeover of FTIL board, if it happens, would be the first such development since the Satyam case in 2009.

In Satyam matter, the scandal-hit IT firm was later sold to Tech Mahindra through a government-monitored auction.

Post merger, FTIL would take over all the liabilities of NSEL, including payments due to be paid to investors and others to help in repayment process.

Soon after the government’s amalgamation order on October 21, FTIL had said in a brief statement that it “is taking appropriate steps in the matter in consultation with the legal Counsel of the company”.

FTIL did not comment on the proposal for making changes to its board. The merger of NSEL with FTIL will itself fructify after taking into account submissions and objections, if any, by the shareholders and creditors of the two firms.

For assessing the compensation amount to be given to affected investors, a chartered accountant entity might be appointed soon by the government.

Sources close to the FTIL group, however, said that the present matter was different from the Satyam case on various counts. The erstwhile IT firm’s promoter Ramalinga Raju had confessed to the regulator of his wrongdoings, while Jignesh Shah has been consistently denying any wrongdoing and the matter of his culpability was sub-judice.

The Ministry’s decision comes more than a year after the payment scam at NSEL came into light in July 2013. The move has been initiated taking into consideration “essential public interest” as the exchange is “not left with any viable, sustainable business while FTIL has necessary resources to facilitate speedy recovery of dues”.

So far, the crisis-hit spot exchange has managed to recover only little over Rs 360 crore dues from defaulters, a part of which has been disbursed and the rest is in an escrow account. Funds worth about Rs 5,300 crore are yet to be recovered for subsequent payment to affected investors. 


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NSEL fraud: Govt mulls revamp of FTIL board

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