NSE co-location case: Supreme Court refuses to stay SAT order

The Supreme Court on Monday refused to stay the Securities Appellate Tribunal (SAT) order that had set aside the order by the Securities and Exchange Board of India (Sebi) against the National Stock Exchange (NSE) in the colocation case. The Sebi order had imposed a Rs 625 crore disgorgement penalty on the NSE.

The Supreme Court bench led by justice Sanjiv Khanna asked the market regulator to refund Rs 300 crore to the NSE subject to the latter giving an undertaking that it would return the money along with interest if Sebi succeeded in its appeal in the Supreme Court.

The apex court issued notices to NSE and Ravi Narain and Chitra Ramkrishna, former managing directors and chief executive officers of India's biggest exchange, and posted the matter for further hearing in September.

Tribunal says no fraud committed
The case relates to the alleged lapses in high-frequency trading offered through the exchange's colocation facility that allegedly gave some entities preferential access.

SAT had set aside the disgorgement order on January 23 and instead imposed a ₹100 crore penalty on the exchange for lack of due diligence in following norms while offering colocation. It said the stock exchange did not make any illicit gain in the colocation case.

The appellate tribunal had also set aside the 25% disgorgement penalty Sebi imposed on salaries collected by Narain and Ramkrishna over the relevant period. The SAT said there was no finding of fraud, unfair trade practice or collusion against them.

The direction prohibiting Narain and Ramkrishna from associating with any listed company, market infrastructure institution or any other market intermediary for five years was also set aside and substituted with the period already completed.

The tribunal had observed that the NSE had not indulged in any unethical act nor had unjustly enriched itself because of any wrongful act. The lack of due diligence by the NSE was on account of human failure to comply with the circulars fully.

It had asked Sebi to refund the amount paid after deducting ₹100 crore penalty. NSE has deposited ₹1,044 crore with Sebi.