Big relief to 63 Moons; SC stays order allowing appointment of govt nominees on board

In a big relief to 63 Moons Technologies (formerly known as Financial Technologies (India), the Supreme Court on Wednesday stayed the National Company Law Appellate Tribunal order that allowed the government to appoint its three nominees on the board of the company.

63 Moons, the promoter of now-defunct NSEL, was caught up in the Rs 5,500-crore NSEL payment crisis in 2013.

The apex court also allowed its two directors Dewag Nerala and Manjay Shah to get reappointed as directors of other companies except 63 Moons and the National Spot Exchange Ltd (NSEL). However, the appointment of Jignesh Shah would be looked into after six weeks.

The three directors along with six others were barred from holding directorship in 63 Moons, as per the June 2018 order of the National Company Law Tribunal, Chennai Bench. They were declared “not fit and proper persons” to be the directors of any company under Section 388B of the Companies Act. The NCLAT had also dismissed the plea of the company’s three directors challenging their disqualification.

Last year in March, the appellate tribunal had disallowed the Ministry of Company Affairs from superseding the board of 63 Moons that was caught up in the Rs 5,500-crore NSEL payment crisis, but had upheld the directions of the tribunal to appoint three government nominees on the board of 63 Moons to take care of the interest of all stakeholders as well as protect the company’s investments in its subsidiaries.

A Bench led by Justice Vineet Saran stayed the NCLAT and NCLT order after lawyers for 63 Moons and three directors argued that the company was not responsible for the misdeeds of its parent company.

While stating that the NCLAT order is flawed as it had erroneously involved it also, 63 Moons argued that it was its subsidiary NSEL that had been allegedly mismanaged and its business was carried on in a manner prejudicial to public interest. Affairs of both the companies were completely different and were being run by different separate and independent board of directors and none of the common directors were involved in the day-to-day affairs of NSEL, it added.

The Rs 5,600-crore scam came to light in July 2013, when NSEL, a 99.99% subsidiary of 63 Moons, defaulted on its obligations to 13,000 investors. To safeguard public interest, the Ministry of Corporate Affairs on February 12, 2016 decided to merge NSEL with Jignesh Shah promoted FTIL under Section 396 of the Companies Act. This was the first time that the government had invoked a forced merger between the two private companies. Post merger, NSEL’s entire business, properties and liabilities, among others, would have been transferred to FTIL, the parent company of NSEL.

The merger order was challenged by FTIL before the Bombay High Court, which dismissed the petition. The Supreme Court later in April 2019 set aside the merger of 63 Moons with the scam-hit NSEL.