Case: 63, Moons Technologies Limited (Formerly Financial Technologies (India) Limited &amp; Others Vs. The Union of India &amp; Others

was appointed to inspect and audit the position, reported that stock worth only Rs.358 crores was available, even though, NSEL, had solemnly stated that it has stocked valued at Rs.2389.36 crores. This means that there was hardly any stock in the warehouses with which deliveries could be effected. All this, left the Trading Clients in a lurch. The impugned order details the nexus between NSEL and FTIL, in the context of the crisis, which led to the collapse of the spot exchange.385. In MCX Stock Exchange India Limited (supra), the Division Bench of this Court (Dr. D.Y. Chandrachud, J. as His Lordship then was and A.V. Mohta, J.) has held that stock exchanges provide what is described as the first layer of oversight. In many areas, stock exchanges are self regulators. As self regulatory organizations, stock exchanges have a frontline responsibility for regulation of their markets and for controlling compliance by members of rules to which they are subject. They ensure in that capacity, compliance of the requirements established the statutory regulator. Apart from the regulation of members, market surveillance carried on by stock exchanges in certain jurisdictions regulates issuers. They do so by ensuring that the stocks of issuers are reliably traded and that issuers meet standards of corporate governance. In exercising these powers, stock exchanges may face issues involving a conflict of interest. Such conflicts of interest have to be handled and addressed effectively within the regulatory framework. Stock exchanges as institutional mechanisms have an important role to play in ensuring the stability of the financial and economic system.386. The Division Bench notes that the orderly functioning of the market for securities is no longer a matter of a private concern, for those who transact on the market. The market for securities can be volatile. Transactions in the securities market and the transparency of institutional mechanisms have a significant bearing on the wealth of investors. Inflows and outflows of capital from the stock market have an immediate and, often serious, impact on financial stability in the country. The orderly functioning of stock exchanges as institutions through which transactions in securities take place is a matter of public interest. The regulatory powers which have been conferred upon SEBI to recognise stock exchanges must be understood in the context of ensuring the protection of investors on one hand and the public interest that is involved on the other. SEBI is an expert regulatory body which is vested with the power to direct and regulate the functioning of stock exchanges. SEBI, as a regulatory authority, is vested with wide powers to ensure the protection of the interest of investors and the orderly development of the securities market. Ensuring the proper management of stock exchanges is a matter which falls within the regulatory framework which SEBI directs. Where the affairs of a recognized stock exchange are conducted in a manner detrimental to the interest of the investors or the securities market, it has consequences not just for the stock holders in the market, but for the financial stability of the nation. Stock exchanges are the first frontiers of regulation, for it is their duty to ensure, in the first instance, that transactions are conducted in a transparent manner and in accordance with the rules and regulations and bye laws that have been approved. Their duty to report to SEBI is an adjunct of the power conferred upon SEBI to regulate.387. In Coimbatore Stock Exchange Limited (supra) , the Madras High Court has observed that as is known, the National Stock Exchange, the Bombay Stock Exchange and the Regional Stock Exchanges in India play the role of a Barometer in the development of Indian economy and in such view of the matter, any action which is detrimental to the interest of the investing public at large and contrary to the provisions of SCRA and SEBI Act, will certainly have a negative impact on the economic system of the country as a whole.388. The distinction made by the petitioners in the course of rejoinder that the decisions in MCX (supra) or Coimbatore Stock Exchange (supra) are concerned with Stock Exchanges and not Commodity Exchanges is really, a distinction without any difference. The observations in the two decisions regards the importance of exchanges to the economic health of the country, apply with full vigor to commodities exchange, particularly, a national level commodities exchange having turnover of thousands of crores.389. The conduct of the affairs of stock and commodity exchanges is of vital importance to the national economy. Stock and commodity exchanges provide vital hubs for investors and traders to trade in share and commodities. Commerce in modern economy is inconceivable without them. The perception of Indian economy, both locally and abroad, depends to a large extent on the functioning and the health of its stock and commodity exchanges. The failure of a national level commodity exchange under circumstances as stated in the impugned order, is clearly, a matter of serious concern. It is reported that almost 99.99% of the ostensible spot trading in commodities in the entire country was taking place on the NSEL spot exchange. The paired contracts offered by NSEL, which were in breach of the conditions of exemption notification, alone accounted for a turn over of Rs.1,34,000 crores between the years 2009 to 2013.390. If exchanges such as these are permitted to be subverted or fail without honouring their obligations and commitments, the confidence in national economic institutions is bound to suffer and the repercussion to the national economy will be severe. In such situations, a negative perception about the business environment of the country is created, which has grave repercussions on the national economy. The Central Government, quite conscious of all such factors, has taken a balanced decision in the facts and circumstances of the present case.391. Therefore, in the facts and circumstances of the present case, even upon exercise of intensive review and the application of the test of proportionality, we see no reason to interfere with the impugned order.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]152. The impugned order, records and considers in substantial details, the objections and suggestions received from various parties. In paragraph 7.2 and 7.3 of the impugned order, the Central Government, considered and dealt with the various objections and suggestions raised by and on behalf of FTIL and NSEL. As noted earlier, both FTIL and NSEL were even afforded an opportunity of personal hearing. Paras 7.4, 7.5 and 7.6 of the impugned order, the Central Government has considered and dealt with the objections and suggestions on behalf of shareholders, creditors and investors group. In paragraph 7.7, the submissions made by industry chambers have been considered. In paragraph 8.1 and 8.2 suggestions or in piece provided by EOW and Enforcement Directorate have also been considered. Therefore, it is not possible to accept the contention that there has been failure of natural justice on account of anyof objections and suggestions made by FTIL, NSEL, its shareholders, creditors and other interested persons.153. From the record, we are also satisfied that this is not a case where the Central Government has placed reliance upon certain adverse material in the impugned order, without afford of opportunity to FTIL, NSEL and other interested party to refute or submit their explanation to the same. The material which the Central Government proposed to rely upon was substantially reflected in the draft order, which was furnished in compliance with the statutory scheme of Section 396. All the parties had more than ample opportunity to submit their objections and suggestions to the draft amalgamation order. NSEL, FTIL, several of its shareholders, creditors and even employees did in fact, submit their objections and suggestions to the draft order. No specific case has been made out in the context of the contention of any alleged failure of natural justice for taking into consideration adverse material, not made known to the parties. On basis of vague allegations and oral submissions, it is not possible to fault the impugned order on the ground of failure of natural justice.154. There was a complaint that principles of natural justice were not followed before FMC or other regulatory agencies recommended action under Section 396. This complaint, is quite misconceived. There is no requirement of compliance with principles of natural justice before FMC or any other regulatory authority proposes or recommends action under Section 396. In this case, the record bears out that such proposals/recommendations were made known to the parties likely to be affected and such parties made their detailed submissions why such proposals and recommendations be not acted upon. As noted earlier, the principles of natural justice cannot be placed in some straitjacket formula. Upon consideration of totality of circumstances, it is quite clear that the affected parties were treated fairly and consistent with the principles of natural justice.155. This is also not a case of there being any variation between the grounds set out in the proposed order and in the impugned order. Such a ground was therefore rightly not raised in the pleadings or argued in the first instance. The petitioners themselves contend that the impugned order is quasi judicial in nature. The impugned order does address objections and suggestions made by the petitioners themselves. Section 396(4) (b), itself contemplates that the Central Government, upon consideration of suggestions and objections as received, makes such modifications, if any, in the draft order as may seem to it desirable in the light of such suggestions and objections. The fact that exhaustive suggestions and objections were made by the petitioners upon virtually all facets of the draft order, itself suggests that full opportunity was afforded to the parties to put forth their suggestions and objections. There is no case of failure of natural justice or fair play, therefore made out by the petitioners in the facts and circumstances of the present case.156. Extensive submissions were made to urge that the impugned order in the present case was in the nature of delegated or subordinate legislation. On this basis, it was urged that the principles of natural justice were inapplicable, except perhaps to the extent indicated in the parent statute. In this case, proceeding on the basis that the impugned order is an administrative or at the highest a quasi judicial order as urged by the petitioners, we find that there was no breach in compliance with the principles of natural justice and fair play. Therefore, we do not deem it necessary to address the issue as to whether the impugned order is in the nature of delegated or subordinate legislation. Even independent of any decision upon such issue, in the facts and circumstances of the present case, we are satisfied that no case has been made out to interfere with the impugned order on the ground of any failure in compliance with the principles of natural justice and fair play.157. Accordingly, for all the aforesaid reasons, we are unable to fault the impugned order on the ground of non compliance with the principles of natural justice and fair play or on the ground of any breach of our directions in order dated 4th February 2015.In this case, since FTIL, NSEL and in particular their shareholders have failed to demonstrate that they have been deprived of their property, there is no question of any infringement of Article 300A of the Constitution. The shareholders cannot confuse between the property of the companies and the interest which they hold by virtue of their shareholding. Further, none of the petitioners have demonstrated any infringement of their rights under Articles 14 and 19 of the Constitution. Accordingly, there is no necessity to go into the issue of any derivative immunity, which might or might not attach to the impugned order made under Section 396. Only if the petitioners had made out a case that the impugned order infringes the rights guaranteed to them under Articles 14, 19 or 300A of the Constitution, could the issue of derivative immunity have assumed importance. Since, this is not the case, we do not deem it necessary to go into the issue of derivative immunity.201. Therefore, upon cumulative consideration of the aforesaid, we are unable to accept the contention that the Central Government wasin law or on facts to order the compulsory amalgamation of allegedly loss making wholly owned subsidiary (NSEL) with its profit making holding company (FTIL) in public interest by resort to Section 396.The contention based on thedraconian consequences of compulsory amalgamation cannot impact statutory interpretation particularly where the statute is clear, plain and unambiguous. Normally, in such a situation, the courts are bound to give effect to the meaning, irrespective of the consequences. This is not to say that the petitioners have established any draconian consequences. On one hand, the petitioners suggest that there is no possibility of NSEL being adjudged liable to the investors. The petitioners also suggest that there are sufficient assets already attached to satisfy decrees against defaulters. On the other hand, the petitioners, expressed apprehensions of draconian consequences on the premise that liability may be foisted on NSEL for making good the amount of over Rs.5600 crores to the investors. The statutory construction of a provision which is clear, plain and unambiguous cannot sway on the basis of such inconsistent apprehensions.The matter can be viewed from yet another perspective. In the context ofwe have already examined the scope of Section 396(3) and held that the interest of the shareholder referred to therein does not include the economic value of their shareholding or some right to earn profits through any capital appreciation of listed value of shares. Further, we have held that the question of assessment of compensation arises only where the shareholders interest in or rights against the resultant company are not, as nearly as may be, the same as the shareholders interest in or rights against the original company. We have also held that in so far as the shareholders of FTIL are concerned there is no diminution in their interest in or rights against the resultant company as compared to their interest in or rights against the original company.218. This means that even on merits, there is no infirmity in the assessment order dated 1st April 2015 to the extent, it denies compensation to the shareholders of FTIL. The same is the position of the creditors of FTIL. There is nothing in the provisions of Section 396(3) which suggest that prior hearing has to be afforded to members or creditors before assessment order is made. Nothing prevented the shareholders from raising their objections in response to the draft order. Several shareholders, including perhaps the petitioners, did in fact, raise objections. If the shareholders were aggrieved by the assessment order dated 1st April 2015 because it awarded them no compensation, nothing 132 of prevented them from instituting appeal under Section 396(3A) within period of 30 days from the date of publication of the assessment in the Official Gazette. At best, the contention now raised by the petitioners, which again, is not at all backed by any pleadings, is some hyper technical objection based upon the form of assessment order dated 1st April 2015. In the facts and circumstances of the present case, we are not inclined to exercise ourand equitable jurisdiction under Articles 226 and 227 of the Constitution and upset the impugned order on the ground urged.219. For all the aforesaid reasons, we are satisfied that this is not a case where the Central Government or the prescribed authority has failed to make any order as contemplated by Section 396(3) or that the shareholders or creditors of FTIL were deprived of opportunity of appeal under Section 396(3A) and therefore there is any breach of the procedure prescribed in Section 396(4) in making the impugned order. Accordingly, we see no merit in the contention that the impugned order is ultra vires Section 396.We see no merit in any of the aforesaid contentions. There is nothing in either the text or the context of Section 396 to suggest that the same can be invoked only in respect of government companies. Even assuming that the provisions of Section 396 have been invoked for the first time to amalgamate two non government companies, such a circumstance neither vitiates the exercise of such power nor can the same be struck down as involving any hostile or invidious discrimination.223. The argument of novelty, can perhaps be best answered, in the words of Lord Denning in Packer vs. Packer (1953 (2) ALL ER 127)What is the argument on the other side Only this, that no case has been found in which it has been done before. That argument does not appeal to me in the least. If we never do anything, which has not been done before, we shall never get anywhere. The law will stand still while the rest of the world goes on, and that will be bad for both.Since, Section 396 contemplates no application to the Court or Tribunal under Section 391 or otherwise, there was no necessity of expressly excluding the application of Section 391 from the scheme of Section 396. In order to obviate any contention that the Central Government, in the exercise of its powers under Section 396, is nevertheless required to apply the same parameters as are prescribed to the courts or tribunals in Section 394, the legislature may have deemed it appropriate to provide for a non obstante clause to override the effect of Sections 394 and 395.239. Besides, if the provision in Section 396 is analyzed, it is apparent it represents a complete Code in so far as amalgamation of two or more companies by the Central Government in public interest, is concerned. Therefore, on the basis of circular dated 20th April 2011, it is not possible to read into Section 396 the provisions of Section 391.240. Since, the petitioners have failed to establish that the impugned order made by the Central Government is in violation of Article 14 of the Constitution, there is really no reason to go into the issue as to whether the impugned order enjoys any derivative immunity under Article 31A (1)(c) of the Constitution. The issue of immunity, whether derivative or otherwise would have arisen, had, the petitioners been able to establish that the impugned order was in violation of Articles 14 of 19 of the Constitution. Since, the petitioners have failed to establish any violation of Article 14 or 19 of the Constitution, there is no necessity to go into the issue of immunity, whether derivative or otherwise.241. Accordingly, we are unable to fault the impugned order on the ground of violation of Article 14 of the Constitution or on the basis of the petitioners reading of the Central Governments circular dated 20th April 2011.Significantly, neither Mr. Mookherjee nor Mr. Dwarkadas chose to elaborate upon the distinction, if any, between national interest and public interest in the context of Section 396. They merely suggested that some test more stringent than what might apply to public interest will have to be applied, in determining national interest. Since, the learned counsel mainly rely upon Notes on Clauses to the 1959 Bill which states that the amendment to substitute national interest with public interest in Section 396 is of a drafting nature , there is no reason to accept their contention that nevertheless there is some distinction between the two expressions in the context of Section 396. If at all, there is any distinction between the two expressions, then, the circumstance that the Parliament, in terms, has chosen to amend Section 396 so as to substitute the expression national interest with public interest, will have to be respected and not ignored.254. In fact, even the decision of the Gujarat High Court in Wood Polymer Limited (supra) relied on by Mr. Mookherjee expressly states that the expression "public interest" is sometimes used as an expressionfor the national interest. This is a term very often used in contradistinction to "private interest" or "personal interest". It is something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected (vide Blacks Dictionary, 4th edition, p. 1393). The word "public" has a very wide connotation, and though the word "public" has a very wide connotation, the perspective in which it is used will determine its ambit. The expression "interest of the general public" came in for construction in Emperor v. Jesingbhai (1948) 50 Bom LR 54), wherein it was held that it is an expression of wide connotation and has got several implications. As the expression will take its colour from the context in which it is used, the object behind the legislative intendment within which it is used and the mischief it seeks to suppress, all these factors will enter into the verdict in deciding what constitutes public interest in the context of the legislation in which it is used. In the very nature of the case, modern conditions and the increasingof the different human factors in the progressive complexity of a community make it necessary for the Government to touch upon and limit individual activities at more points than formerly. (Vide State of Bihar v. Maharajdhiraj Sir Kameshwar Singh of Darbhanga (AIR1952 SC 252).255. In any case, taking into consideration the importance of stock and commodity exchanges to the national economy and the unprecedented situation which the Central Government was required to deal with in the wake of collapse of the entire commodities exchange, we are unable to hold that the impugned order was not made in national interest.256. The decisions in MCX Stock Exchange (supra) and Coimbatore Stock exchange (supra), highlight on the importance of stock and commodity exchanges to the national economy. These decisions hold that the perception of the Indian economy, both locally and abroad, depends, to a large extent, on the functioning and health of its stock and commodity exchanges. The Central Government, in this case, having taken measures to deal with an unprecedented situation arising out of the failure of a national level commodity exchange leaving investors with claims of over Rs.5600 crores, in a lurch, is certainly a matter involving national interest.257. For all the aforesaid reasons, we are unable to fault the impugned order on the ground that it makes no specific reference to national interest but focuses merely on public interest.This is not a case of compulsory amalgamation of two unrelated companies. NSEL, is admittedly a wholly owned subsidiary of FTIL in which FTIL holds 99.9998% stake. Since FTIL is effectively the only shareholder of NSEL, the constitution of the Board of Directors of NSEL is naturally controlled by FTIL. There is material on record to suggest that minutes of board meetings of NSEL were regularly tabled at the board meetings of FTIL. Jignesh Shah, directly or indirectly has a stake of 46% in FTIL. At the relevant time, Jignesh Shah was described as Founder Chairman and Group CEO of FTIL, apart from being of Managing Director of FTIL. Jignesh Shah at the relevant time was described as a Vice Chairman of NSEL and also the Head of the Audit Committee of NSEL. As per the accounting standards, the balance sheets and other accounts of NSEL were required to be and were routinely placed before the Board of FTIL.277. There is material to indicate that both NSEL and FTIL had common key personnel. There is material to indicate that software for the operations at the NSEL Exchange had in fact been provided by FTIL. The FTIL, loaned an amount of Rs.179 crores or thereabouts to NSEL to enable NSEL to at least settle the investors with claims upto Rs.2 lakhs. The FTIL, in the course of these proceedings has filed an affidavit to state that it has, till date, infused an amount of Rs.109 Lakhs in NSEL towards working capital and to assist NSEL in recovery proceedings against defaulters. The affidavit states that FTIL has committed further amount of Rs.50 crores per year for the next 3 years. There is material on record that from July 2013, at NSEL there is hardly any commercial activity or returns. NSEL is confronted with several litigations and the strength of its employees which was 193 in July 2013 has come down to 33 by July 2014. On basis of all such objective facts, if the Central Government, forms the subjective satisfaction that it is essential in public interest to amalgamate NSEL with FTIL so as to give effect to business realities of the case by consolidating the two businesses and preventing FTIL, from distancing itself from NSEL, we can, in the exercise of judicial review see no reason to upset such a decision or hold that such a decision is not in public interest.278. There is sufficient material on record on basis of which the Central Government has subjectively satisfied itself that the amalgamation is essential in public interest to facilitate recoveries of dues from defaulters from pooling human and financial resources of FTIL and NSEL. Despite claims by NSEL that it has the means to and it has been rigorously pursuing recoveries, the fact remains that the position of recoveries is not very promising and may further deteriorate if only NSEL has to fend for itself. In such matters, it is not sufficient that some decrees or attachment orders are obtained. This is also not an issue of mere recoveries but this is an issue of investor confidence in the very functioning of stock and commodity exchanges. If the Central Government, were not to act in a situation of this nature, investor confidence would certainly be a casualty. Such a situation then, has a cascading effect, which is by no means conducive to the national economy.279. The Central Government, in making the impugned order has balanced the interests of the two companies, its shareholders, creditors and employees on one hand and the interests, not only of the investors who may have claims, but also, of the investing public, which is required to be given the confidence that the Central Government will act to see that a holding company does not take shelter behind its wholly owned subsidiary and thereby shirk responsibility in the wake of such an unprecedented payment crisis. The three grounds or reasons stated in the impugned order, in our opinion, were sufficient to arrive at the subjective satisfaction that it was essential in public interest to order the amalgamation of the two companies. This is not a case of exercise of powers for any extraneous considerations or alien purposes.The Supreme Court proceeds to observe that the exercise which, therefore, is to be taken is to find out as to whether the limitation of constitutional rights is for a purpose that is reasonable and necessary in a democratic society and such an exercise involves the weighing up of competitive values, and ultimately an assessment based on proportionality i.e. balancing of different interests. At the same time, reasonableness of a restriction has to be determined in an objective manner and from the standpoint of the interests of the general public and not from the point of view of the persons upon whom the restrictions are imposed or upon abstract considerations. In examining reasonableness, the Court has to keep in mind factors like the directive principles of State policy, prevailing social values and social needs which are intended to be satisfied by the restrictions, the excessiveness of the restrictions. However, no abstract or general pattern or fixed principles of universal application can be applied in such matters. The court will have to examine the matter from case to case basis as also with regard to changing conditions, values of human lives, social philosophy of the Constitution, prevailing conditions and surrounding circumstances. Ultimately, a just balance has to be struck between the restrictions imposed and the social control envisaged.374. Even applying the proportionality test, we are quite satisfied that the impugned order warrants no interference in the facts and circumstances of the present case. The impugned order amalgamates NSEL with FTIL for the three broad reasons set out in the impugned order. In the context of the three reasons, we have already held that neither of them could be regarded as extraneous or irrelevant to the purpose for enactment of Section 396. Thus, it is clear that the action taken was in furtherance of the legitimate aim or the proper purpose, namely, public interest. The measures taken by the impugned order are rationally connected with the fulfillment of the purpose. This means that the means adopted by the Central Government are quite suited to achieve public interest in the facts of the present case.In this case, we find that the Central Government has adopted quite a balanced approach in making the impugned order. The impugned order is certainly not comparable to using a sledge hammer to crack a nut, to borrow the phrase from Leyland and Anthony (Textbook on Administrative Law, 5th Edition). The Central Government in this case, advisedly refrained from making any determination of liability or going into the issue of any alleged fraud. This was in order not to prejudice NSEL or FTIL in the pending litigations. In fact, FTIL, in its petition, had expressed apprehensions that the Central Government might initiate action to supercede the Boards of the Companies thereby assuming full control over the management of the companies. At least, at the stage of making the impugned order, no such option was exercised by the Central Government.Besides, in this case, it is necessary to note that both FMC as well as the Central Government have referred to Grant Thornton report and the objective facts which emanate from the audit report. Merely because some of the inferences flowing from the common objective facts are similar, that by itself, does not suggest surrender, abdication or dictation. FMC, in making its order dated 17th December 2013 was concerned with the issue of declaring FTIL, Jignesh Shah and others as not fit and proper persons in the context of operations at the exchanges considering inter alia the objective facts as borne out by the Grant Thornton report and other relevant material before it. The Central Government, in making the impugned order was concerned with the issue of amalgamation of NSEL with FTIL in public interest, again, on the basis of objective facts, inter alia in the Grant Thornton report and the other material before it. The overlap of some material, is by no means sufficient to vitiate the exercise of subjective satisfaction.362. Once we are satisfied that the Central Government has not made the impugned order solely relying upon FMCs order or by surrendering, abdicating or acting to the dictates of FMC, the circumstance that challenge to the FMCs order is sub judice is not of much significance. The extreme submission in the course of rejoinder that since this court has issued Rule in the petition challenging FMCs order dated 17th December 2013, the Central Government was precluded from even referring to the FMCs order cannot be accepted. As noted earlier, this court, whilst issuing Rule in Writ Petition Nos. 337, 363 and 370 of 2014 challenging FMCs order, proceeded to reject interim relief by order dated 28th February 2014. The special leave petitions against the order dated 28th February 2014, were dismissed as withdrawn. In the order refusing interim relief, this court has noted that FMC has recorded elaborate and detailed findings of fact after considering the evidence on record. The order further notes that such findings have been recorded after compliance with principles of natural justice and the same disclose serious non compliances. No doubt, such observations are only prima facie. The petitioners have themselves contended that in a matter of this nature, it is not sufficient for the Central Government to merely allude to the circumstances but further, there should be at least prima facie proof with regard to such circumstances.363. The material on record, however, indicates that NSEL, offered and promoted contracts which were in breach of the conditions in exemption notification dated 5th June 2007. Further, NSEL offered and promoted paired contracts, which were found to be nothing but financing transactions distinct from genuine sale and purchase transactions in commodities. There is material on record which indicates that NSEL went to the extent of assuring fixed returns to the investors and by the year 2013, almost 99% of the turnover of the exchange comprised such paired contracts. Ultimately, on 31st July 2013, NSEL, suspended the operations at the exchange. At this stage, the commodities sellers defaulted on their outstanding payments obligations to the Trading Clients to the extent of almost Rs.5600 crores. The NSEL also sought to wriggle itself out of its obligations by contending that the counter guarantee was to apply only in relation to specified commodities and since none had been specified, the counter guarantee was in effective. The settlement guarantee fund to be maintained by NSEL and which was stated to be Rs.738.55 crores as on 1st August 2013, was, on 4th August 2013 found to be only Rs.62 crores. Even though the transactions at the spot exchange were to be backed by commodities supposedly checked and stored in warehouses owned and controlled by NSEL, SGS India Limited, which was appointed to inspect and audit the position, reported that stock worth only Rs.358 crores was available, even though, NSEL, had solemnly stated that it has stocked valued at Rs.2389.36 crores. This means that there was hardly any stock in the warehouses with which deliveries could be effected. All this, left the Trading Clients in a lurch. The impugned order details the nexus between NSEL and FTIL, in the context of the crisis, which led to the collapse of the spot exchange.364. For all these reasons, we are unable to fault the impugned order applying the test of Wednesbury unreasonableness.Therefore, even applying the triple test formulated by Lord Diplock for judicial review, we are satisfied that there is no illegality involved in the making of the impugned order. So also, we are satisfied that there is no procedural impropriety since the impugned order was made after due compliance with principles of natural justice and fair play. The procedural element in Section 396 was also followed by the Central Government in making the impugned order. There is no irrationality involved because in the facts of the present case there is no basis to even suggest that the decision is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it. There is material in this case to hold that the subjective satisfaction recorded by the Central Government is based on objective facts its stand more than prima facie established. This is also not a case where relevant considerations have been ignored or irrelevant considerations taken into account by the Central Government in making the impugned order.355. This is also not a case where the Central Government has in fact lifted corporate veil despite the allegedof the circumstances justifying the lifting of such corporate veil. The provisions of Section 396 are based upon the premise that each of the companies proposed to be amalgamated are companies having their independent corporate existence and corporate personality. This is not a case where the Central Government, has lifted the corporate veil and sought to apportion any liability upon either NSEL or FTIL. This is also not a case where the Central Government has sought to apportion any liability of NSEL upon FTIL. Rather, the Central Government, in public interest, has chosen to amalgamate the two companies, thereby acknowledging their corporate veil. Besides, Mr. Khambata may not be entirely incorrect in his submission that the facts and circumstances of the present case may have justified the lifting of corporate veil. Accordingly, we are unable to fault the impugned order on the ground that the same involves lifting of corporate veil without existence of any circumstances warranting such lifting.In the present case, we are unable to accept Mr. Chinoys contention that the impugned order could never have been made by any reasonable man or authority on the ground that the amalgamation would facilitate NSEL in recovering dues from defaulters by pooling human and financial resources of FTIL and NSEL and that such a reason is extraneous.299. In Ion Exchange (India) Limited (2002 (1) Mh.L.J. 411), the learned Single Judge of this Court Dr. D.Y. Chandrachud, J. (as His Lordship then was), has held that the pooling of human, material and financial resources between a holding company and its loss making wholly owned subsidiary cannot be regarded as an extraneous or an irrelevant factor in their amalgamation. Viewed in the context of business realities, this is a permissible object and nothing militates against public interest or commercial morality. No doubt, that was a case involving consensual amalgamation between a holding company and its loss making wholly owned subsidiary. However, the observations therein answer the contention that pooling of human material and financial resources between a holding company and its loss making wholly owned subsidiary, viewed from the context of business realities, is neither any extraneous, irrelevant consideration nor is such a consideration contrary to public interest or commercial morality.300. In Ion Exchange (India) Ltd. (supra), this Court has held that though, as a matter of law, the transferee companies are independent corporate entities, equally, as a matter of business reality, the Court cannot ignore the plea of the Transferee Company that the that the health and the well being of its wholly owned subsidiaries was a matter which was legitimately entitled to be taken into account by the Transferee Company in coming out with the decision to amalgamate its wholly owned subsidiaries with itself. In the circumstances, the plea that the scheme of Amalgamation is an attempt to reduce the business and operational losses, inclusive of manpower and machinery costs ought to be accepted. Similarly the foundation of the scheme for Amalgamation is that the amalgamation will enable the three Companies to pool together human, material and financial resources. This consideration particularly in a case where the two Transferor Companies are wholly owned subsidiaries cannot be regarded as extraneous or irrelevant. This Court, taking into consideration the business reality noted that the holding company seeks to emerge from the economic difficulty which face its subsidiaries which have become loss making entities. The effort is to pool together human, financial and material resources and to deploy them, upon amalgamation in a manner that would enhance profitability. This is a permissible object and nothing in the proposed scheme in the present case militates against commercial morality, the public interest or a view which a reasonable body or shareholders or creditors would adopt. The impugned order cannot, in such circumstances, be held to be irrational or based on any extraneous or irrelevant considerations.301. For all the aforesaid reasons, we are unable to accept Mr.Chinoys contention that the impugned order is based on only one ground or reason. We are also unable to accept Mr. Chinoys contention that there was no material on record in support of such ground or reason and further, such ground or reason was not sufficient to prompt any reasonable man or authority to order the compulsory amalgamation of NSEL with FTIL.Again, we are satisfied that there is ample material on record, on basis of which, the Central Government could have and has arrived at the satisfaction that the NSEL lacked necessary financial and infrastructural wherewithal to make recoveries from the defaulters, who may have traded on the spot exchange platform of NSEL. Therefore, it is not possible to accept Mr.Chinoys contention that there exist no objective facts on which the Central Government could have been subjectively satisfied.288. There is material on record, which is in fact undisputed that NSEL was loaned an amount of Rs.179.26 crores by FTIL for distribution to the small investors, who, suffered losses by trading the platform and spot exchange of NSEL. There is material on record that NSEL, after it closed the operations at the spot exchange on 31st July 2013 had assured the investors/traders that revised settlement calender would be announced after 15 days period. On 14th August 2013, NSEL, informed FMC that it would calculate the net obligation of the members and proposed a settlement plan extending over 30 weeks. Again, this assurance was made subject to realisation of funds from the concerned members. NSEL, however, defaulted on its own settlement plan from the 1st week itself. As of 22nd September 2014, NSEL, could disburse only an amount of Rs.541.69 crores as against net obligations of over Rs.5600 crores.The aforesaid contention, coming as it does from NSEL, is in direct conflict with the averment in NSELs affidavit dated 15th April 2016 sworn by Santosh Dhuri, which reads thus:10. It is submitted that the bedrock of the impugned draft order is a proposal dated 18 August 2014 sent by Forward Markets Commission (FMC), to the Central Government thereby asking Central Government to invoke section 396 for amalgamation of NSEL with FTIL. It is submitted that said FMCs proposal itself based on erroneous andof facts which were not laid out before the Central Government in its right and correct perspective and which in our opinion misled the Central Government in passing the impugned draft order. It is submitted that the Central Government has blindly relied upon the said FMC proposal in the impugned final order without applying its mind independently and objectively to the material placed on record by the Respondent No.3 vide its objections, oral hearing and written submissions filed before the Ld Committee.285. The contention raised by counsel for NSEL is directly contrary to even NSELs understanding of the impugned order. None of the petitioners or the intervenors read the impugned order in the manner suggested by the counsel for NSEL. In any case, bare perusal of the impugned order indicates that the same is based upon three distinct and discernible grounds or reasons, each of which represents a facet of public interest which is sine qua non for exercise of powers under Section 396.