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Apex court adjourns merger case relating to PE-backed 63 Moons

16 February, 2018

The Supreme Court (SC) on Friday adjourned till 8 April the matter relating to the merger of 63 Moons Technologies with scam-hit National Spot Exchange Ltd (NSEL). Also, it maintained status quo on the Bombay High Court (HC) judgment that allowed the government to merge 63 Moons, formerly FTIL or Financial Technologies India Ltd, with NSEL.

Mumbai-based 63 Moons had filed six special leave petitions on 13 February against the Bombay HC ruling.

63 Moons had informed the stock exchanges that it would move the apex court against the HC order allowing the government to go ahead with the merger. Earlier, HC had granted a 12-week stay till 3 March on the merger ordered by the government.

In February 2016, the Ministry of Corporate Affairs (MCA) had held FTIL, the erstwhile parent firm of the spot exchange, responsible for the liabilities of NSEL in the Rs 5,600-crore payment default case, and had ordered a merger between the two.

That MCA order was challenged in the Bombay HC. Subsequently, the petition by 63 Moons was dismissed by the court, which allowed the government to merge the two private entities in “view of larger public interest”.

NSEL is a wholly-owned subsidiary of the Jignesh Shah-led FTIL. According to the MCA order, the liabilities of the commodity bourse for alleged insider training need to be absorbed by FTIL.

Citigroup Private Equity (CVCI GP) LLC owned a 4.3% stake in the company through CVCIGP II Employee Rosehill Ltd. The portfolio is now part of The Rohatyn Group, after Citi sold its PE arm to meet the requirements under the Volcker rule.

Private equity giant Blackstone GPV Capital Partners (Mauritius) had sold its entire stake in 63 Moons during the July-September 2017 quarter. Blackstone took a deep haircut on its five-year investment.

The ‘fraud’
The alleged fraud committed at NSEL came to light in July 2013, when the exchange abruptly suspended trading in all contracts, resulting into a payment default. Following this, the exchange was forced to suspend trading and eventually down its shutters, leaving over 11,000 investors in the lurch.

The scam led to regulatory and government interventions and, eventually, also resulted in the government announcing the merger of Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi).

The merger between the two regulators was the first such major case, wherein the functions of FMC and Sebi were brought under one umbrella. The relatively more frequent practice, worldwide, is the creation of a new regulatory authority.

In the Union Budget for 2015-16, finance minister Arun Jaitley had announced the merger of FMC and Sebi, effective from September 2015.

The measures for the commodity derivatives market also have their roots in various speculative activities affecting the market, including that of NSEL.

Note : The story has been updated to reflect the correction that the Supreme Court adjourned the case. An earlier version had incorrectly stated admission, instead of adjournment.

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Apex court adjourns merger case relating to PE-backed 63 Moons

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