SAT Sets Aside SEBI’s Disgorgement Order Against NSE In Co-Location Case

The SEBI had directed NSE to disgorge Rs 624.89 crore at 12 per cent interest per annum from April 2014 onwards

In a major relief to the National Stock Exchange (NSE), the Securities Appellate Tribunal (SAT) in Mumbai on Monday set aside the SEBI's April 2019 order directing it to disgorge Rs 1,000 crore for committing violations of stock exchanges and clearing corporation regulations.

The capital market regulator in its order on April 30, 2019, had directed NSE to disgorge Rs 624.89 crore at 12 per cent interest per annum from April 2014 onwards. However, NSE will still have to bear the brunt of paying Rs 100 crore to SEBI’s Investor Protection Fund on account of its failure to conduct due diligence, according to the SAT order.

The orders passed against former MD and CEO of NSE, Ravi Narain and Chitra Ramkrishna to disgorge 25 per cent of their salaries to the Investor Protection Fund have also been set aside. Narain was asked to disgorge 25 per cent of his salary drawn during FY11 to FY13 and Ramkrishna was asked to disgorge her salary drawn for FY14.

Disgorgement refers to the repayment of gains that have been made illegally.

The SAT has also set aside the regulator’s order barring Ramkrishna from associating with any listed company or market infrastructure institution, or any other market intermediary for five years.

For OPG securities private limited, the SAT directed that the disgorgement amount should be recalculated.

Chitra Ramkrishna was arrested by the CBI in March 2022, which is close to four years after an FIR was registered by the investigative agency in the scam. Both Narain and Ramkrishna were in charge of the exchange when the co-location scam was happened.

The co-location matter refers to complaints against NSE for allegedly giving preferential access to some clients which provided them with trading advantage. NSE had launched the co-location facilities in 2009 which permitted traders and brokers to establish their IT servers within the premises of NSE’s data centres in return for a fee.

Narain has not been arrested yet, Ramkrishna is lodged in jail for another matter that involves illegal phone tapping of NSE employees. The CBI is currently awaiting permission from the NSE’s board to prosecute Ramkrishna.