The
government had filed a petition under Section 397 & 398 read with Sections
388D, 388C, 401, 402, 403, 406 and 408 of the Companies Act, 1956 before the
Principal Bench of the Company Law Board, now National Company Law Tribunal
(NCLT), in New Delhi seeking removal and super session of the Board of Directors
of 63 moons on the following two grounds:
1. Attempts to thwart the Amalgamation Process
The MCA has alleged that although the 63 moons Board is attempting to frustrate
the ultimate object of proposed merger, which if affected, would provide
suitable recompense to the victims of the defaults. 63 moons Board is also
accused of diverting funds from 63 moons and illegally selling valuable assets
of 63 moons. It has also alleged that 63 moons Board is attempting to
sell/dispose/alienate/ hive off valuable assets of 63 moons: i.e. approval of
postal ballots notice for shareholder to sell Bourse Africa and attempt to hive
off 63 moon's most popular software, ODIN.
2. Mismanagement & Oppression Perpetrated By 63 Moons – Mcx Was Sold At Loss
Though the MCA had applied for restraint on sale of Bourse Africa, ODIN and
other assets by way of an application in Section 396 Petition, the Hon’ble
Bombay High Court did not grant that relief. It must be noted however that the
sale of stake in Bourse Africa has been promulgated due to regulatory issues
that arose as a result of the FMC order. In fact the process for sale of stake
in Bourse Africa commenced long before the Draft Order dated 21st October, 2014
for amalgamation of NSEL with 63 moons was even passed. In affidavit in reply
MCA stated that MCA do not have objection for sale of investments if it is
directed by the regulators. With respect
to ODIN, the information was in the public domain prior to filing of the Writ
Petition by 63 moons challenging the Draft Order.
The
MCA says that 63 moons’ current Board is opposing the merger hence justify
taking over 63 moons’ management, conveniently setting aside the fact that the
merger of NSEL with 63 moons is still sub-judice. Again, the MCA’s draft order
invoking Section 396 of the Act doesn’t anywhere say why a merger of NSEL with
63 moons is in public interest. The MCA also ignored that 63 moons has the
fiduciary responsibility to protect the interest of 63,000 shareholders, over
1,000 employees and other stake holders. 63 moons has been lawfully opposing
the merger with humble submission to restrain from any hasty decision when the
matter is sub-judice.
The
MCA has alleged that due to mismanagement of NSEL by 63 moons and its
directors, the FMC passed an order and 63 moons had to divest in a number of
commodity exchanges in India and overseas, which caused a loss of investment,
which raises a serious doubt on the viability of 63 moons. It has also alleged
that 63 moons’ divestment in MCX is in complete contravention to the FMC order
which only stated that 63 moons is not “Fit & Proper’ (but didn’t direct
divestment), but 63 moons sold its entire stake (26%) at a loss of Rs. 290
crore. Such actions by the 63 moons Board raise serious apprehensions of the
continuance of Board.
The
MCA itself in its petition states that FMC directed 63 moons is not fit &
proper to continue to hold 2% or more paid-up equity capital in MCX and
therefore to salvage the value of MCX, without prejudice 63 moons divested its
shareholding in MCX. The FMC and other
regulators forced 63 moons to exit, despite the FMC Order being sub-judice and
despite 63 moons contesting the same vigorously in the relevant regulatory /
appellate authority. It is absurd that compliance with regulatory orders by 63
moons to salvage value of its investments in time – before they are rendered
worthless by regulatory wrath such as cancellation of license, renewal of
contracts, issuance of new contracts or putting shares in escrow followed by
auction etc. – is being used against 63 moons and its Board.
63
moons, without prejudice to its rights, divested its holdings in companies as a
result of regulatory directions to do so. In the case of MCX, there have been
numerous letters from MCX insisting that 63 moons divest its holdings in short
time as a result of the FMC Order. Pertinently, those letters also say that the
regulator, i.e. FMC is not permitting launch of any new contracts to MCX unless
compliance of divestment is made. Accordingly, FMC had threatened to bring down
the value of 63 moons’ holding to almost nil had it not complied with the
direction of divestment. The Board of 63 moons divested from MCX in manner
where the loss caused to 63 moons and its shareholders was significantly
reduced.
None
of the members of 63 moons have made an application that the Company’s affairs
in a manner oppressive to any member or members; however MCA invoked the
Section under Sec 408 without validating how the affairs of the Company being
conducted either in a manner which is oppressive to any members of the Company
or in a manner which is prejudicial to the interests of the Company or to
public interest.
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