Sources close to the development said Sebi will argue in the apex court that the tribunal’s order is inconsistent with its earlier order against audit firm PWC in the matter of Satyam Computers. SAT had upheld Sebi’s order directing PWC to disgorge the fees charged by it.
“In the present case (NSE), the disgorgement out of revenue by NSE has not been upheld,” said a person close to the development.
An email query sent to Sebi went unanswered.
On January 23, SAT set aside Sebi’s disgorgement order of Rs 625 crore against the country’s biggest bourse in the co-location case. Co-location refers to traders being able to place servers in close proximity to those of an exchange, thus giving them a time advantage that translates into massive profits. The regulator had alleged that some brokers get preferential access in the co-location facility. But the tribunal directed NSE to pay Rs 100 crore to the investor protection and education fund created by Sebi, for lack of due diligence.
“The basis for arriving at the reduced amount has not been spelt out in the SAT order,” said another person familiar with the development.
Sebi, in the Supreme Court, will also defend SAT’s remarks that the regulator had adopted a slow approach and placed a protective cover over NSE’s alleged misdeeds.”This is quite misplaced in light of the severe penal action taken by the Sebi in the matter,” said the person quoted above. “Also, considering the technological complexity involved in the case, Sebi has considered seven reports of experts while passing the order.”
Sebi’s directive to NSE to engage a third-party forensic auditor for thorough examination of the issues highlighted in the complaint was based on the advice of its Technical Advisory Committee, said sources.
The SAT order had said it was “strange” how Sebi directed NSE to conduct an investigation against itself.
“The appointment of forensic auditors at the first instance is not unusual in Sebi investigations,” said the second person quoted above.
Sources said there are ‘certain inconsistencies’ in the SAT order in the co-location case.
“For example, SAT has itself observed deficiencies by NSE regarding ‘inequitable distribution in the allocation of Ips (Internet Protocols)’, ‘absence of load balancer’ and ‘failure to monitor frequent connection to the secondary server’.
The Tribunal ironically concluded that Sebi’s finding holding NSE responsible for its failure to provide equal, unrestricted and fair access is wholly erroneous,” the person said.
In 2015, Sebi received complaints alleging that a trading member OPG Securities used NSE’s system to its advantage by having an arrangement with an NSE executive.
The first one to connect to the lowest load server would get advantage in terms of receiving the data faster than others.
In 2019, Sebi passed a series of orders against the NSE and its former chief executives, Chitra Ramkrishna and Ravi Narain, in the co-location case.