The Securities and Appellate Tribunal (SAT) on Wednesday put a stay on disgorgement orders issued by the Securities and Exchange Board of India (Sebi) against the National Stock Exchange of India (NSE) in the co-location case.
The tribunal directed the NSE to transfer Rs 687.5 crore from the escrow account to the Securities and Exchange Board of India (Sebi) within two weeks. This will be kept in an interest-bearing account till the result of the appeal.
The SAT further directed NSE to place all revenues emanating from its co-location facility in the same escrow account and furnish details of the account to Sebi periodically. At present, the escrow account has Rs 2,344 crore deposited in it.
Sebi had directed the bourse to disgorge Rs 624.9 crore, along with an interest of 12 per cent per annum from April 1, 2014, till the actual date of payment. In a separate order, Sebi asked the exchange to deposit Rs 62.6 crore along with 12 per cent interest from September 11, 2015.
The SAT also directed NSE to initiate an enquiry against its employees -- Deviprasad Singh, head of co-location support at NSE and, vice president of special projects at the exchange --- as directed in the impugned order and submit the report to Sebi within six months. However, the tribunal has said that neither Sebi nor NSE should take action against the employees during the pendency of the appeal.
“Prima facie, the contentions raised by the parties requires consideration which cannot be decided at the admission stage. Whether the appellant exercised due diligence and whether the appellant has given benefits or preferential treatment to certain entities who made large profits from the quantity of data that was transmitted are all questions which require determination,” the tribunal observed in its order.
Sebi has been given six weeks to file its reply to NSE petitions and the exchange can file a rejoinder within three weeks after that.
The regulator had barred the exchange from raising funds from the market for a period of six months from the date of the order. On Wednesday, NSE’s counsel said that it had no intention of raising capital for that duration by way of an initial public offering. The counsel further argued that Sebi should take only the amount equivalent to disgorgement amount, excluding interest.
The exchange had, in a statement last week, said it has “strong grounds” to contest the Sebi orders including the monetary liability.
On April 30, Sebi had passed multiple orders against NSE and some of its current and former employees for lapses at its co-lo facility that allowed preferential access to certain brokers. Sebi had also given remedial directions to NSE to improve governance and transparency at the exchange.
The matter will next come up for hearing on July 22.