Last week, the ministry of corporate affairs (MCA) had proposed a merger of NSEL with its holding company FTIL that owns 99.99% stake in the latter.
According to Praveen Nigam of Amplus Consulting, even if the objective of such a takeover is to look after the interest of troubled investors, it must be very clearly laid down.
Experts argue that the primary difference between the Satyam case and FTIL case is that in case of the former, it was the a standalone entity that used its subsidiary companies to purport the scam and the promoter owned up the fraud.
On other hand, in NSEL scam, even as Jignesh Shah- the promoter of FTIL and key management personnel of the spot exchange when the scam was evolving, is proved to be a part of the fraud, the involvement of FTIL as the promoter may still need to be proved.
Satyam takeover happened through a bidding process while FTIL is forced to be merged with NSEL which has raised the questions of limited liability of a shareholder in a company, said a legal expert.
However, on their part, the troubled investors, during various court hearing, have been arguing that NSEL was incorporated with an intent to fraud investors and the law lift the corporate veil for providing justice.
Although experts believe that the minority shareholders of FTIL that own close to 54% stake in the company would contest the government's decision of a forced merger, a closer look at the details of stakeholders show that nearly 20% of the public holding stays with just about five investors.
According to corporate tax lawyer HP Ranina, as long as it follows a due process, the government can exercise its power to change the management of a company and appoint an executive to look after the interest of the investors.
He said that even as there is a possibility of minority shareholder of FTIL contesting such decisions, there have been cases where courts have guided for such an appointment, added Ranina. The FTIL shares lost nearly 5% on Monday before closing at Rs 186.90, down Rs 9.10.