Assocham said that a company cannot be held liable for "any alleged liability" of a subsidiary, unless so adjudicated by a court of law
Industry chamber Assocham said on Sunday that it has written to Finance Minister Arun Jaitley to reconsider the draft merger order of the National Spot Exchange Ltd (NSEL) with its parent firm Financial Technologies (India) Ltd (FTIL) in the larger interests of domestic trade and industry.
"The proposed forced amalgamation of NSEL with FTIL through an administrative order would set a very dangerous precedent in the domestic corporate sector, as it ignores valuable rights granted under law to the various stakeholders of a company," the Associated Chambers of Commerce and Industry of India said in the letter to Jaitley, who is also the minister of corporate affairs.
To safeguard the interest of investors and creditors in the face of a Rs.5,600-crore payments crisis at NSEL, the corporate affairs ministry had last year proposed a merger of the spot exchange with FTIL.
FTIL said last month that 99.55 percent of the shareholders have objected to the proposed amalgamation of NSEL - which represents 79.58 percent of its total equity capital.
Assocham said that a company cannot be held liable for "any alleged liability" of a subsidiary, unless so adjudicated by a court of law.
"It will destroy the concept of 'limited liability' which is the fundamental principle of corporate jurisprudence," it said.
It also claimed the merger would adversely affect over 63,000 shareholders and more than 1,000 employees at FTIL.
It said the ministry has finalised the share swap ratio for the proposed merger of "crisis-hit NSEL with its holding company FTIL."
"However, the share swap assessment order will be effective only after the government takes a final decision on merger," the statement added.
The controversy took a new turn on March 31 with the FTIL management proposing a settlement with traders who lost their money while dealing at the commodity bourse.
"We have proposed a solution that ensures that 94 percent trading clients receive between 50 and 100 percent of their claims", chief executive and managing director of Financial Technologies Prashant Desai said in a statement.