Two days ago, the Bombay High Court quashed Financial Technologies ' plea against the Ministry of Corporate Affairs that sought to oust FTIL's board of directors and today the Company Law Board (CLB) has adjourned the matter till April 17.
FTIL on March 2 said that its board has unanimously opposed the MCA petition to CLB seeking "removal and supersession" of the FTIL board. The board also noted that since the company's four legal suits are sub-judice - including representative suit, fit & proper and writ petition filed opposing amalgamation of NSEL with FTIL, the petition by MCA is inequitable to seek replacement of the entire board.
Speaking on the ongoing tussle, Prashant Desai, MD & CEO of FTIL said that he believes resolution to the matter is a better alternative for clients and shareholders than slugging out a legal battle.
In an interview to CNBC-TV18, Desai said the company has to protect the interest of 63,000 shareholders and that the path of resolution is good for all the parties involved.
Making a fair proposal to resolve the matter, he said brokers need to chip in money for resolution plan to work.
Below is the transcript of Prashant Desai's interview with CNBC-TV18's Sajeet Manghat and Shereen Bhan.
Sajeet: Can you take us through the settlement which you are planning to do for the NSEL investors?
A: It is important to lay out the construct or the building blocks and the thought process behind the proposal that we have made to the government of India. We clearly had two paths, not just FTIL for everybody involved in this so called default crisis. The first path is a very clear path of conflict which everybody is currently going towards. There is a long tail there, you keep on fighting in a legal court of low. We do not when the real judgement comes out and whenever the legal proceedings decide whoever is the so called person responsible for what happened the person or the company will be punished. We believe there is a better alternative which is the resolution path. As FTIL, somebody who has to protect the interest of 63000 minority shareholders, we believe the path to resolution is a path where we believe it is good for everyone. It is good for the so called trading clients of NSEL who have to receive these payouts, it is good for the brokers, it is good for the government, it is good for the country per se and it is definitely good for the FTIL shareholders. So, we have clearly proposed this to the government considering the fact that all the concerned people over here will probably choose to look at the path of resolution and in that our basic construct has been to be fair, equitable, not just to FTIL and its shareholders but to everybody concerned. That is the assumption which we thought was right and we made this proposal.
It is in line a very simple construct that we are putting, we believe that everybody will have to chip in if there is going to be a fair and just and equitable resolution. We are saying we are taking the lead. Some time back we had already put Rs 180 crore to take care of close to about 50 percent payments to about 7000 trading clients of NSEL. We are saying we will come and put another Rs 320 crore which takes our contribution to about Rs 500 crore. Our view and our very strong view is that brokers are equally party to this because you have to understand the privity of the contract. Trading client was with the broker we had nothing to do with those trading clients. For three years this trading client used the brokers to probably trade on the platform of NSEL. We somewhere believe these brokers are also now getting caught into this. We believe if the broker also with a resolution in mindset pitches in with their Rs 500 crore we will have close to about Rs 820 crore at the first instance.
Let me share with you what this Rs 820 crore does. At the first instance for all the trading clients who were to supposed to receive payouts of less than Rs 10 lakh every single person, 100 percent of them which is close to about 7000 trading clients get 100 percent of their money back.
For those trading clients who have to receive payouts between Rs 10 lakh and Rs 1 crore they will get 50 percent of the money that is owed to them. Then the second leg of our proposal is, that is the contribution from us and from the brokers, we believe that all of us are in sync, government of India, us, brokers, trading clients, let us all put all efforts that we have at our disposal and let us go ahead and recover this money from the defaulters.
If a sum of only Rs 1800 crore is recovered from the defaulters of the Rs 5600 crore of payin that they have to do, we believe that this will take care of 50 percent of the balance amount that one has to pay for all trading clients who are supposed to receive between Rs 10 lakh and Rs 1 crore. For all those who are so called ultra HNIs to have to receive more than Rs 1 crore they will also receive 50 percent. In effect 94 percent of trading clients will receive payouts where some of them will receive close to about 50 percent, some of them will receive about 100 percent.
Sajeet: There are two issues with this, one you haven't approached the brokers in this. Second, the question of number of investors is now in question because even NSEL is questioning the fact that of the 7500 investors which were supposed to be paid out in the first where you brought in Rs 179 crore they can only trace about 3500 investors. So, how have you gone about approaching the brokers because brokers are not onboard earlier as well when you were trying to come out with a settlement formula which was being done behind when Jignesh Shah was in the executive capacity and now especially when heat is on them?
A: Somebody had to take the first step. Currently what we saw is there is too much of negativity going around. Everybody is fighting with each other, we decided somebody has to take a first step with resolution in mind. So, we have made that first step. In all earnest and the details of the proposal that I shared with you we went to the government and we have proposed the thing. We now believe the ball is in governments court. We are sure at some point of time government will consider this whether they consider exactly this, they have a modification to this we are not privy to that but government will get in touch with the brokers. As I said the principle context of this thinking or the thought process is all of us will have to bring on table a resolution mindset. If everybody brings a partial resolution and a partial conflict mindset I don't think this will flow through. Our approach is we are showing that first step from our side.
Shereen: If I can interrupt you and just to take Sajeet's point forward because as you mentioned that you envisaged this settlement, you have decided to take the first step. You would hope that the brokers will also participate and chip in with another Rs 500 crore but what has been the response from the brokers so far and what gives you the confidence that the government will entertain this settlement proposal in any fashion?
A: Yes, good question. Two things- have we approached the brokers, the answer to that is clear no. As I said, somebody had to take the first step, we would believe that FTIL is the first person that has now decided to take the first step. Will the government consider this, not up to me, it is up to the government and as I said, the principal construct of this that everybody will have to have a resolution mindset. It is not something that I can achieve all on my own so, that is my first point.
Second point to answer Sajeet's question in terms of the genuineness of the trading clients etc, I am saying that is a exercise which NSEL is doing on its own, we do not want to interfere with that exercise. Our proposal has an underlying assumption. Our underlying assumption is that all 13,000 probably are genuine. If they are genuine they will get the claim, if they are not genuine they will not get the claim. The way we are also proposing this is in a very open transparent manner, there is a government of India that steps forward, Bombay High Court has already appointed a committee; let that committee also participate, let brokers also come in, let the real genuine trading clients who were supposed to receive these payouts, let them also join in. All I am saying is we want to bring a lot more positivity from a resolution mindset.
Shereen: But speaking of a resolution, the government seems to have made up its mind as far as FTIL is concerned and today the matter was taken up by the CLB. It has now been adjourned to April 14 th but the MCA petition is seeking the ouster of the FTIL board, the MCA petition alleges that the FTIL board is not fit and proper. It does not seem like the government is likely to buy a settlement proposal being put forward by FTIL on the face of it?
A: Efforts are in our hand, results are not. Somebody had to make the first move, we believe we have done so. We have tried to be as fair as we thought we could be in proposing. Now the ball clearly is in the government's courts and as I was explaining , we are not stopping the government from taking a path of conflict. They can go ahead; they can take a path of conflict. They have all the weaponry and arsenal in their capacity which they can use. As much as the weaponry and arsenal that they have to use against us, our view is we also have the court of law. We have the highest regard for India as a country, India as a democracy. We believe the institution of law in India are one of the most powerful all over the world and make no mistake, we will fight that battle as well in the court of law.
As regards your 396, 397 I am saying government has a point of view on 397, we have a point of view on 397. Through your media and through your channel let me just make a couple of perspectives which will give you some insight of what will probably pay out either in the court of law or company law board. The entire 12 member board that we have today, this board has only taken one decision thus far, just one decision and that decision has been to oppose the amalgamation of NSEL with FTIL and why is that decision being taken, in fiduciary capacity to protect the interest of my 63,000 plus shareholders. Question to you today as media, isn't board justified in taking that stance? By ousting the board what exactly do you think the government probably will do? They will instead of opposing the amalgamation, they will probably say, okay as a new board I will vote in favour of merger. So, these are some of the arguments that will play out in a court of law.
Shereen: Not for us to make judgement calls on whether it is fair or not fair or what the government or what FTIL or NSEL or the CLB is likely to do on this matter but let me ask you whether in your capacity now that you have decided to take the first step and forward a proposal of some sort which we are given to understand brokers are not on board with at this point in time, you are saying that you have not reached out to the brokers to start with but do you have the capacity to better this proposal?
A: It is a very hypothetical question; to a hypothetical question what do I answer? The question is if everybody—I look at life very simply, I live my life very simply. It is very simple; if everybody has a resolution mindset I don't think this is that big a problem. If you look at US for example, this whole credit default swap that happened, they resolved a problem of that big magnitude. You mean to say the government of India, us, the trading clients who had to receive the money and the settlement payout and the brokers, all four of us together in this country at this stage of this country will not be able to resolve, answer to this?
