NSE Co-location Scam: CBI May Expand Scope of Probe beyond FIR
The Central Bureau of Investigation (CBI) in a status report on the NSE (National Stock Exchange) co-location scam, informed the Delhi High Court on Wednesday that its investigation was not restricted to the first information report (FIR) which was initially registered.
 
The CBI said that in case any fact emerges that the "NSE/SEBI/Department/Ministry or any private person/public servant irrespective of office he was holding during the relevant period, if found part of conspiracy", that particular individual or entity will be investigated in accordance with the law.
 
Therefore, CBI has come on record that the scope of the investigation can possibly go beyond the FIR in order to unearth the larger conspiracy in the scam. 
 
Earlier, the Delhi High Court had directed the CBI to submit a status report on 22nd May on its investigation.
 
A public interest litigation (PIL) filed by petitioner Shantanu Guha Ray, represented by senior advocate Mahesh Jethmalani, contended that abusing its market position, the NSE helped deviant brokers and politicians make alleged illegal gains, risking the institutional set-up of exchanges. 
 
The petition also alleged that the Securities and Exchange Board of India (SEBI) failed to take stringent action against such errant brokers from the NSE, it's own officers who were involved and other culpable persons.
 
The scam basically alleges market manipulation at the NSE. It has been alleged that only a few select players got access to the market-price information, before anybody else could. 
 
This helped the deviant brokers to make wrongful gains which, allegedly, ran into thousands of crores of rupees.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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NCLT and SEBI at Loggerheads over Attachment of Ponzi Debtor's Properties
The principal bench of the National Company Law Tribunal (NCLT) has directed market regulator Securities and Exchange Board of India (SEBI) to de-attach the properties of a corporate debtor attached during its execution proceedings. The matter brings into focus the issue of the in-built disagreement between the SEBI Act and the provisions of the Insolvency and Bankruptcy Code (IBC). Especially, how a corporate debtor that was operating as an illegal collective investment scheme (CIS) can be revived under the IBC. Was it due to inactiveness of SEBI to act on  orders of SAT (securities appellate tribunal) to sell assets of the debtor in timely manner?
 
Last week, in an order, the Bench ruled, "SEBI is directed to de-attach the properties of the corporate debtor and hand over the possession to the resolution professional (RP) to conduct the corporate insolvency resolution process (CIRP) expeditiously, in accordance with the timeline in the Code."
 
A corporate debtor, HBN Dairies and Allies Ltd, an investment scheme operating as an unregistered collective investment scheme (CIS), was admitted into CIRP based on an application filed by some investors.
 
A recovery officer from SEBI had passed an attachment order based on the adjudicating officer's order in 2015, a year before HBN went into CIRP. The Securities Appellate Tribunal (SAT) upheld SEBI's decision on HBN, and subsequently ordered the sale of its assets as a part of recovery.
 
According to Dr Rajendra M Ganatra, an insolvency resolution professional and restructuring consultant, in terms of the SAT order, SEBI was to have sold the assets by December 2017. "However, it (SEBI) took absolutely no action. It seems there is no monitoring system in SEBI and critical matters remain pending without action for indefinite times," he said. 
 
Wondering how a Ponzi operator can be revived under the IBC, Dr Ganatra, says, it is good that the matter has landed in IBC where timings will be more or less followed. However, he says, "the RP must not fail to initiate petition under Section 66 to book the promoters for fraudulent transactions. No crime abates with the entry in IBC, and it is the responsibility of the IRP to bring all facts in the information memorandum for actions against criminal promoters even beyond IBC."
 
HBN had told the NCLT that the ongoing recovery proceedings by SEBI would amount to conflict with its plea before the Tribunal admitting it into CIRP.
 
The NCLT noted that SEBI is bound by the directions issued by the SAT, and that provisions of IBC would come into conflict with the stand taken by SEBI.
 
Admitting HBN's application, the NCLT saw merit in the case made out by the company and observed on the overriding nature of Section 238 of the IBC. It then allowed the RP to take action on the matter.
 
After examining the issue, the RP requested the NCLT to de-attach the company properties in view of Section 14 of IBC, which imposes a moratorium on the corporate debtor's properties.
 
"In view of the provisions of non-obstante clause of Section 238 of the Code, any right under any other law cannot come in the way of the IBC", NCLT had said in its order.
 
NCLT also observed that in the absence of records and possession of the property belonging to the corporate debtor, the RP would not be able to perform his duties in a time-bound manner and "there would be no possibility of any resolution which is the primary object of the IBC."
 
It also noted that the income-tax (I-T) department had already de-attached the properties belonging to the corporate debtor, and the RP could go ahead with the possession.
 
NCLT's order establishes the IBC's superiority over other laws which, apparently, act as an obstruction during the CIRP.
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COMMENTS

VASANT KULKARNI

2 months ago

NOW, VERY GOOD EXCUSE FOR RECOVERY.

Co-location case: NSE to appeal against Sebi order
NSE will appeal against a Sebi order in the co-location issue in which it has been penalised up to Rs 1,000 crore and barred from approaching market for the next six months at the Securities Applleate Tribunal (SAT).
 
When contacted, NSE spokesperson declined to comment. The exchange has made a regulatory filing on the development. 
 
"The holding company is in the process of filing an appeal to contest the aforesaid orders with the Hon'ble Securities Appellate Tribunal, the future outcome of which is uncertain at this stage," the NSE said in its consolidated financial statements for 2018-19. 
 
In a volume of five orders issued on May 1, Sebi had asked the NSE to "disgorge" its profits from co-location worth Rs 624.89 crore at 12 per cent interest to the Investor Protection and Education Fund (IPEF). The amount with interest would add up to about Rs 1,000 crore. 
 
The Sebi had also penalised NSE's two former CEOs and founding members Ravi Narain and Chitra Ramakrishna. 
 
Narain, who was heading the exchange between 2010 and 2013, was asked to deposit 25 per cent of his salary for the three fiscals in IPEF, while Ramakrishna, who was the CEO of the exchange starting fiscal 2014, was asked to deposit 25 per cent of her salary for that fiscal. She stepped down as CEO in December 2016. 
 
In the order, the regulator had found lapses in the use of dark fibre by certain trading members in violation of NSEs own policy norms. 
 
Dark fibre is a dedicated communication line through which messages travel faster than regular lines because of the absence of other traffic.
 
But, there is nothing illegal about using such faster connectivity infrastructure. Sebi held that NSE had been taking inconsistent positions and its conduct broke its own rules right from the time when a non-registered member, Sampark, was granted permission in April 2015 to lay dark fibre cable for two brokerage firms leading to lack of fair play and favourtism. 
 
"The data so received from NSE was being misused for the purpose of developing algo-based trading software for their commercial gains," S.K. Mohanty, a full-time member of Sebi had said earlier. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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