When the NSEL payments crisis first broke several years ago, even as the Bombay High Court set up a committee headed by a retired judge to receive and dispose off assets and settle dues—it had attached properties worth over `5,000 crore at one point—the government ordered the merger of NSEL with its parent FTIL.
Since FTIL had large cash reserves and owned various investments that were easily liquidated, the government felt this would be one way to ensure that those whose money was stuck would get some of it back.
This was a move fraught with problems—and the Serious Frauds Investigation Office (SFIO) has just said many of the brokerages involved were also guilty, not just NSEL—one of which was the issue of limited liability that is the bedrock of how companies are run in India and the world over; that is, the liability of promoters is limited to the equity capital in the company. Read more
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