IN a setback to the Jignesh Shah-promoted Financial Technologies (India) Ltd (FTIL), the Supreme Court on Monday set aside a Madras High Court’s order that had partially lifted freeze on the company’s assets and investments.
The high court, in February, had suspended the CLB’s June order which restrained embattled Financial Technologies (India) Ltd from selling and creating third-party rights over its assets and investments, but allowed the company to deal with its investments.
While quashing the CLB’s June 30, 2015 order, a bench headed by Justice A R Dave questioned the HC’s intervention on an interim order, saying: “when the matter is yet to be heard by the CLB, why should the high court intervene?”
It, however, allowed FTIL to make expenses required for day-to-day operations of the company. The apex court further clarified that it has not expressed any opinion on the merits of the case.
While asking the CLB to expedite the hearing of the case, the judges allowed the company to raise the issue before the CLB, which will hear the matter on May 6.
The CLB is hearing a petition from the ministry of corporate affairs for supersession of FTIL’s board of directors on the grounds that the FTIL board was responsible for the payments scam at National Spot Exchange (NSEL). Against the CLB’s June order, FTIL had moved the Madras High Court, which granted a partial stay.
FTIL senior counsels A M Singhvi and Amit Sibal opposed quashing of the HC order. “Not even a single paise has been siphoned off… strangulation order will serve no purpose… My business will come to standstill. Governments apprehension is unfounded and its rights are well protected,” they argued.
Solicitor General Ranjit Kumar appeared on behalf of the government.
To protect the interest of investors in the R5,600-crore scam at NSEL, the government had moved the Supreme Court seeking to retrain the FTIL from possible “asset stripping”. The Centre submitted that “the impugned orders had kept the June order in abeyance, thereby opening the window of opportunity for FTIL to sell, alienate, hive-off or otherwise dispose of the software assets and other tangible moveable assets, for which indications have been seen by the methods of asset-stripping such as declaration of 250% interim dividend vide Board Resolution dated August 8, 2015 while FTIL is reporting losses and profits so as to suit their convenience, thus affecting the public interest and irreparable loss/injury”.
According to the appeal, FTIL itself had stated that it was not in a position to submit the Consolidated Financial Statements, as required under the law as well as norms for good corporate governance, and the same being due to default of FTIL itself in not doing all that it could, to avert such a situation. The top brass – Jignesh Prakash Shah, Dewang Sunderraj Neralla and Manjay Prakash – being charge-sheeted by the Economic Offences Wing, Mumbai Police under the Maharashtra Protection of Investors and depositors Act for the acts, and FTIL cannot be allowed to deal with its assets freely, thereby enriching the three “key managerial personnel” “personally,” the Centre
The government, on February 12, had directed the merger of scam-hit NSEL with its parent FTIL. This order has been challenged by FTIL before the Bombay High Court, which had put a stay till April 22. The scam at NSEL — part of the Jignesh Shah-led FTIL group — came to light in late 2013.