In Brief
In this landmark judgment on compulsory amalgamation under Section 396 of the Companies Act, the Supreme Court set aside the Bombay High Court's order directing forced merger of financial technology company FTIL with its ailing subsidiary NSEL following a commodities trading fraud involving ₹5,600 crore. The Court held the amalgamation order ultra vires Section 396 because: the essentiality condition was not met (emergency situation had substantially resolved by 2016); public interest was not genuinely served (only private investor recovery interests existed); key grounds were omitted from the draft order violating natural justice; and compensation to FTIL shareholders for economic loss was not assessed. The Court clarified that while Section 396 enjoys constitutional protection under Article 31A, such protection does not immunize arbitrary administrative application and requires satisfaction based on objective facts.
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