NSE probe: I-T dept searches premises of brokers, employees

The income tax (I-T) department on Thursday conducted extensive search and survey operations on the premises of current and former top officials of the National Stock Exchange (NSE) and brokers in connection with the ongoing probe into the preferential access controversy at the exchange’s co-location facility. 

I-T officials carried out operations on 40 premises belonging to those who could have benefitted from the irregularities at the exchange’s trading systems. Chitra Ramakrishnan, former MD and CEO, NSE; Suprabhat Lala, vice-president, NSE and his wife; and Sanjay Gupta, CEO, OPG Securities, a broking outfit that received price feeds ahead of others, are among those searched. Searches were conducted in Mumbai, Delhi, and Kolkata.

Ajay Shah, senior fellow at the National Institute of Public Finance and Policy (NIPFP), and brokers Sanjiv Singhal and Amit Kumar Gupta were among those searched. Tax officials told Business Standard that a team of around 16 I-T officers and 40 inspectors and policemen were deployed to conduct the searches at the residences and offices of six-seven individuals.

Sources said that taxmen recovered some cash, documents, email trails, and laptops of the suspects. According to a tax official, “Searches are going on since yesterday (Wednesday) and will continue for two more days.”

“The aim of the searches is to find the beneficiaries of the alleged irregularities and to look for evidence of illegal gratifications received by brokers,” said a senior I-T official.

Tax sleuths initiated action after getting approval from the highest authorities of the finance ministry earlier this week, added a source.

“Based on our intelligence information, some individuals could have made huge financial gains by getting unfair access at the NSE,” said a senior tax official. “We are yet to figure the total gains they would have made. We have seized certain documents and cash found with them. The investigation is still on.”

The tax department plans to investigate all those who have been named in the show-cause notice (SCN) issued by markets regulator, the Securities and Exchange Board of India (Sebi), sources said.

On May 22, Sebi had served SCNs to the NSE and 14 of its current and former key management personnel for alleged irregularities at its co-location facility. 

“Sebi is conducting its own probe. However, those who have benefitted can be pinned with evidences through intrusive action,” said the official cited above. 

NSE has already replied to the SCN issued by Sebi. An email sent to the NSE has not elicited any response yet.