SAT quashes Sebi order in ‘dark fibre’ case, slashes penalties on NSE- QHN

The Securities Appellate Tribunal (SAT) on Thursday quashed an order passed by the market regulator Securities and Exchange Board of India (Sebi) against the National Stock Exchange (NSE), former top executives Chitra Ramkrishna, Anand Subramanian and others in the so-called ‘dark fibre’ case, where certain brokers allegedly exploited the exchange’s internet infrastructure to get faster connectivity to its co-location facilities (colo).

The tribunal delivered its judgment in 16 appeals, which were filed against the common order issued by an adjudicating officer (AO) of Sebi in June 2022. The tribunal had in August 2023 overturned an order issued by a Sebi whole-time member (WTM) with similar allegations.

SAT set aside the total penalty Rs 7 crore imposed on NSE in the Sebi AO order. Further, the penalty on Ramkrishna has been brought down from Rs 5 crore to Rs 25 lakh while the penalty order of Rs 4 crore on Subramanian by Sebi did not sustain.

However, SAT has imposed a penalty of Rs 25 lakh on Sampark Infotainment, which was an unauthorised vendor for providing P2P connectivity to the stock brokers. The penalty imposed by Sebi was Rs 3 crore, which has been quashed.

The tribunal said that out of the nine charges against NSE in the AO order, seven are the same given in WTM’s order. The remaining two charges have also been quashed in this SAT order.

“…non-compliance of the said provision by a few days will not make NSE liable for penalty,” noted SAT.

“We have already found that Chitra Ramakrishna was negligent in her duties as managing director and chief executive officer of NSE and failed to exercise due diligence in relation to the failure by NSE to verify license of Sampark…We, however, find that the penalty of Rs 1 crore each is apparently arbitrary and excessive,” noted Justice Tarun Agarwala in the order.

The tribunal had earlier delivered a judgment on August 9, 2023 against the debarment order on Ramkrishna issued by a Sebi whole-time member in the same matter.

“The finding of the AO that a large number of departments / divisions of NSE including business heads were reporting directly to Anand Subramanian is not based on any material evidence on record and in the absence of any evidence the finding given by the AO is purely based on surmises and conjectures which cannot be sustained,” said the order.