----- Forwarded Message ----- From: Arunesh Madan To: [email protected] ; [email protected] Sent: Thursday, November 27, 2014 12:28 PM Subject: FTIL merger with NSEL. Shri Sanjay Sood Deputy Director Ministry of Corporate Affairs ‘A’ Wing, Shastri Bhawan New Delhi-110001 Email: [email protected] Dear Shri Sood, I am a victim of the NSEL fraud. These are my thoughts: 1. Contrary to Jignesh Shahs plea that the merger would set a bad precedent and open the floodgates of use of Sn 396 which would hurt the sentiment of foreign investors, I believe that the merger will set a good precedent and will strengthen the sentiment of foreign and domestic investors. The fact that this section has never been used before belies the fear that it would open the floodgates of its future use. It is used, and to be used, only in rare cases. NSEL qualifies for its use. The Government has reports of several independent agencies all pointing at the blatant fraud. The concept of limited liability and giving a company a legal entity were propounded to allow small individuals to participate in legitimate ventures, such as ships going out on voyages for trade. The corporate veil cannot be used to hide a criminal from a fraud he has committed. It must be lifted in cases where the business is proven to be illegitimate. NSEL as an Exchange approved by the Government, already has a counterparty liability for all trades. Its liability vests with the parent, FTIL, which wholly owned it. The corporate veil cannot be used to obviate its liability. The question is not about 13,000 investors affected in the NSEL scam. It is about all investors, current and future. Unless criminals are promptly and harshly punished, frauds will keep happening. So by using Sn 396 the Government will send out a message that it is against fraud and for the victims. This will be welcomed by investors. NOT using Sn 396 sends out the opposite message. That is not what this Government wants. The EOW has attached assets worth, on paper, more than the liability of NSEL. The recovery process is slow, thanks largely to a slow judicial process. The parent, FTIL, has not provided adequate resources, financial and organisational, to NSEL, to speed up the recovery process, perhaps deliberately. This delay hurts investors who are already suffering. A merger would place the onus of recovery on to FTIL. You will see a remarkable change in its willingness to provide the resources for a speedy recovery, once the merger places the onus on FTIL. It is FTIL, as the perpetrator of the scam, which should bear the pain of judicial delay and not the investor. This is another reason why the merger is not only necessary but desirable. 2. Crimes need to be punished. This is another reason why Sn 396 must be used in this case. The evidence of fraud is clear and established by several independent reports. To take only one example, why did FTIL and NSEL not have systems in place to verify, and counter verify as a back up, whether or not the stocks of commodities traded, were lying in its godowns? FTILs business, and raison de etre, was in developing software to be used by Exchanges and its members. If this was its business, and its expertise, the absence of checks and balances in the software, and in the organisation cannot but lead to any other conclusion that it was a premeditated fraud. A fraud must be punished. The Government has promised clean governance. That is why a merger is not only needed but is desirable. 3. Reviving investor confidence: The Governments CAD is negative largely because of import of gold. Why do Indians love gold? One reason is because of their lack of faith in paper assets. And the reason for that is because investors have seen little, or delayed action, in several of the previous scams. Had prompt action been taken, and had stolen money been restituted to investors, perhaps their lure of gold would abate, and the CAD become manageable. Yet another reason why the merger u/s 396 is desirable, to tell investors that they would be protected against fraud. Shri Sood, I would also urge you, as part of MCA, to consider one further point. The investors, whose money has been stolen, have few resources to fight extended litigation. On the other hand, FTIL which, together with the defaulters, is the perpetrator, has this pool of stolen money to continue to fight litigation. This money is sourced from the companies. Please look at FTILs legal expenses. Why should MCA not ask FTIL, a company under its control, to stop paying legal fees on behalf of Jignesh Shah, in the interests of justice, of other shareholders of FTIL and yes, of the victims of NSEL? Kind regards Arunesh Kumar Madan Karta Arunesh Kumar HUF Amount Stuck in NSEL Fraud Rs 4.50 Lakhs approximately.
Posted on: Fri, 05 Dec 2014 08:26:53 +0000
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