Salve, Dwarkadas, Khambata et al appear as Bombay HC dismisses 63 moons challenge to NSEL merger

A Division Bench of the Bombay High Court today dismissed an appeal filed by 63 moons technologies limited, challenging the decision of the Ministry of Corporate Affairs (MCA) to merge it with the liability-ridden National Spot Exchange Limited (NSEL)..The Bench of Chief Justice Manjula Chellur and Justice MS Sonak, however, allowed the appellant twelve weeks’ time before the notification comes into force..The merger notification was issued by the MCA in exercise of its powers under Section 396 of the Companies Act 2013, which allows such mergers in public interest. The Constitutional validity of the section had been challenged by the appellants..A spokesperson for 63 moons, formerly known as Finanacial Technologies Limited (FTIL), said that the company would challenge the order before the Supreme Court. 63 moons faces the prospect of absorbing more than Rs. 5,000 crore liabilities on the books of NSEL. An email statement from 63 moons reads,.“The Honourable Bombay High Court has dismissed our writ petition. However, it has granted 12-week stay on the operation of the merger order. We will be moving the Supreme Court during this 12 week period. We have full faith in the judiciary and continue to believe that ultimately the truth and justice shall prevail.”.NSEL, which was promoted by the then FTIL, shut down in 2013 after a major payment default. NSEL has since been ordered not to enter into any fresh contracts by the Forward Markets Commission (FMC), which has since been integrated into the Securities and Exchange Board of India (SEBI)..Post the scam, which is still under investigation, the MCA decided to issue a final order for merger/amalgamation of NSEL with FTIL under Section 396 of the Companies Act. This is the first time this section was invoked by the government for a forced merger between two private companies. If actualised, such a merger would force NSEL’s liabilities on FTIL and make FTIL a party to the ongoing litigation..Therefore, FTIL (now 63 moons) and a number of other parties filed petitions in the Bombay High Court, challenging the notification..A host of senior counsel appeared in the High Court during the course of the hearings. Senior Advocates Harish Salve and Janak Dwarkadas, briefed by Cyril Amarchand Mangaldas, appeared for 63 moons. Vineet Naik, briefed by CAM, appeared for 63 moons founder-promoter Jignesh Shah. Navroz Seervai appeared for Shareholders Association Of Financial Technology India Welfare Association..On the other side, Senior Counsel Darius Khambata and JP Sen appeared for the Centre. Aspi Chinoy, briefed by Naik Naik Co, appeared for NSEL, while Shiraz Rustamjee represented SEBI..Read judgment below.