Sebi has a quasi-judicial order and can be challenged in court, experts say


Late Thursday evening, the Central Bureau of Investigation (CBI) arrested Anand Subramanian, the former Group COO at NSE, from Chennai in connection with the National Stock Exchange (NSE) case that came to light over seven years ago in January 2015.

In its Feb. 11 injunction against former NSE director and CEO Chitra Ramkrishna, the Securities and Exchange Board of India (Sebi) found that an unknown person had influenced Ramkrishna’s decision-making. In addition, the market regulator imposed penalties and restrictions on Ramkrishna, Subramanian, the NSE and two others.

In the co-location matter and related matters, this was the latest among other orders issued by Sebi full-time members and decision makers since April 2019. Five orders were issued under Sections 11 and 11B of the SEBI Act – empowering Sebi to issue instructions to protect the interests of investors – take action against 47 companies. Adjudication proceedings were initiated against 65 companies.

The cases relate to preferential access to tick-by-tick (TBT) data feeds for certain trading members, peer-to-peer (P2P) connectivity via dark fiber and alleged corporate governance failures.

According to sources, the orders are quasi-judicial in nature and can be challenged in court proceedings. However, some of them have been pending in the Securities Appellate Tribunal (SAT) since May 2019.

Regarding NSE co-location:

○ Sebi order, April 30, 2019:

The order ordered NSE to pay Rs 624.89 crore along with interest at 12 per cent from April 2014. It also directed Ramkrishna and Ravi Narain, her predecessor as CEO of NSE, to pay 25 percent of the salary they earned for relevant years to Sebi’s Investor Protection and Education Fund (IPEF) and banned them from using a listed companies or a market infrastructure institution or intermediary for five years.

○ SAT Order 22 May 2019: SAT ordered NSE to deposit Rs 624.89 crore with Sebi which NSE did. On May 17, 2021, SAT issued another order, continuing the 2019 injunction pending investigations conducted by the Respondents. SAT also allowed NSE to close the escrow account subject to depositing Rs 420 crore with Sebi.

○ Current Status: Reserved for order.

In relation to the dark fiber/leased line connectivity permitted by NSE designated stockbrokers:

○ Sebi Order, 30 April 2019: NSE ordered to deposit Rs 62.58 crore. Ramkrishna and Subramanian were banned for three years from holding any management or board position or from associating with any exchange or Sebi-registered intermediary. Some key NSE officials, including Ravi Varanasi, were barred from holding a position in a Sebi-registered intermediary for two years. Way2Wealth broker and GKN Securities were ordered to pay out Rs 15.34 crore and Rs 4.9 crore respectively.

○ SAT order, May 22, 2019:

NSE was ordered to transfer Rs 62.58 crore from escrow to Sebi. The suspension was granted pursuant to SAT orders dated May 6, 2019 and June 6, 2019 in orders relating to Way2Wealth and GKN Securities.

○ Next hearing date: April 18, 2022.

In the case of NSE corporate governance in relation to Ajay Shah and others:

○ Sebi order, April 30, 2019:

Sebi ordered Ajay Shah, who was named in the collocation scam, to refrain from holding a management or board position at any exchange, custodian or intermediary registered with Sebi for two years. Similar restrictions have been imposed on Infotech Financial Services, Sunita Thomas and Suprabhat Lala, among others.

○ SAT order, May 7, 2019:

The Order remained the Sebi Order in operation.

○ Next hearing date: April 18, 2022.

In relation to NSE’s corporate governance:

○ Order by Sebi, April 30, 2019: NSE was ordered to take necessary legal action against, among others, Ajay Shah, Infotech Financial Services and Sunita Thomas for violating the Professional Service Agreement and misusing the data held by them. NSE was also instructed to review all third-party agreements that contain a data-sharing component beginning in 2009, and to take legal action if necessary. Sebi also suspended Narain and Ramkrishna from board or management positions for three years.

○ SAT orders, June 6, June 14 and July 9, 2019: Operation of Sebi order has been suspended.

○ Next hearing date: April 18, 2022.

Regarding OPG Securities:

○ Sebi Order, April 30, 2019: Sebi banned OPG Securities from entering the securities market and from buying, selling or trading securities in their own accounts for five years and ordered them to refrain from accepting new clients and disgorging Rs 15.57 crores. The order also banned Sanjay Gupta and others from entering and trading in the securities market for five years.

○ SAT order, May 6, 2019: Operation of Sebi order suspended.

○ Current Status: Reserved for order.


○ On 10 February 2021, NSE colocation matter: Sebi imposed a penalty of Rs 1 crore on NSE and Rs 20 lakh on Narain and Ramkrishna. On April 21, 2021, SAT suspended operations on Sebi’s order. The next hearing date is April 18, 2022.

○ On 11 February 2021, NSE Colocation Matter: Sebi jointly imposed a Rs 5 crore penalty on OPG Securities, Sanjay Gupta, OP Gupta and Sangeeta Gupta. On May 19, 2021, SAT continued operating the order when the complainants deposited Rs 2.5 crore. The next hearing is on April 18, 2022.

Legal Options

Legal experts say orders issued by Sebi can be challenged and appealed to the SAT and then the Supreme Court. “Other law enforcement agencies are also investigating the matter and may also take action on the matter in accordance with their mandate. CBI has also been investigating the case since 2018 and it remains to be seen what comes of their investigation,” said a legal expert who has been following the case closely.


Comments are closed.