SC notice to NSE on SEBI's plea for Rs 6 crore penalty on it for investing money without nod

The Supreme Court on Monday issued notice to the National Stock Exchange on a plea by SEBI for imposition of Rs six crore penalty for allegedly carrying out activities related to investment in six firms unrelated to its stock exchange business without a permission from the market regulator.

A bench presided over by Justice S Abdul Nazeer sought a reply from the NSE on an appeal by SEBI against the Securities Appellate Tribunal’s decision that quashed its order on penalty.

The regulator claimed the NSE invested in six entities, CAMS, Power Exchange India Ltd, NSEIT Ltd, NSDL E-Governance Infrastructure Ltd, Market Simplified India Ltd and Receivables Exchange of India Ltd.

SAT had stated that all investments were made by NSE before October 3, 2018, which is prior to the enforcement of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, which provided that a stock exchange shall not carry out any activity, whether involving deployment of funds or otherwise, without prior approval of the SEBI.

Appearing for the SEBI, Attorney General K K Venugopal, said the NSE had carried out activities that were unrelated/non-incidental to its activities as a stock exchange through the acquisition of stake in six entities. This was in violation of the provision of Regulation 41(3) and Regulation 38(2) of the SECC Regulations 2012 and 2018, respectively.

As each investment activity constituted an independent violation and there were six such instances, SEBI had imposed a total penalty of Rs six crore in October 2020.

However, NSE, led by senior advocate Shyam Divan, contended there was no any violation of rules, as all investments were made by it prior to the enforcement of the SECC norms in 2018. Some of the investments were made by the exchange as early as in 1999, he said.

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