Securities Appellate Tribunal gives interim relief to NSE on Sebi order

Securities Appellate Tribunal (SAT) on Wednesday stayed the market regulator's order that directed the National Stock Exchange (NSE) to pay a penalty of over Rs 625 crore in the co-location case.

The tribunal asked NSE to transfer Rs 625 crore to the account of the regulator Securities and Exchange Board of India (Sebi).

However, the money will remain in a Sebi account untouched till the final outcome on the case, the appellate tribunal said.

SAT has asked the exchange to keep revenues from its co-location business in a separate account, which currently has a balance of Rs 2,344 crore.

On April 30, Sebi has passed five orders against the alleged co-location and dark fibre case, where the regulator said the exchange has not exercised due diligence while setting up co-location servers. However, the regulator maintained that there isn't sufficient evidence to suggest NSE has engaged in fraudulent and unfair trade practices.

Sebi in its orders had asked NSE to deposit Rs 1,100 crore as penalty, including 12% annual interest, to an investor fund, and also directed its two former CEOs to disgorge 25% of their salaries earned during the specific period. The bourse is also barred from accessing the capital market, thereby pushing its listing plans further away by six months.

NSE had moved SAT, challenging Sebi's orders on the ground that they are unsustainable, arbitrary, and disproportionate.

The exchange has to comply with the fundraising restrictions imposed on it by the market regulator, the appellate tribunal said on Wednesday.

NSE MD & CEO Vikram Limaye recently told DNA Money that the bourse expects to be able to go ahead with its initial public offering (IPO) after six months, and would use these six months in its preparation.

The SAT has asked Sebi to reply to NSE's petition within six weeks. The next hearing is scheduled on July 22.

Corporate Professionals Group founder Pavan Kumar Vijay said NSE is a self-regulatory body, with a lot of power given to it by the market regulator Sebi itself.

"The SAT could have given the transfer order after the final outcome of the case," he said, adding that it will affect NSE's reputation and have a far-reaching impact as this will also weaken the confidence of the market participants in the institution.

SEPARATE ACCOUNT

• The tribunal asked NSE to transfer Rs 625 crore to the account of the regulator Securities and Exchange Board of India
   
• However, the money will remain in a Sebi account untouched till the final outcome on the case, the appellate tribunal said.