SAT Admits Chitra Ramkrishna’s Objection to SEBI Order; directs NSE and Ramkrishna to deposit funds


The court orders SEBI to file a response within 4 weeks and schedules the hearing for June 30th

The court orders SEBI to file a response within 4 weeks and schedules the hearing for June 30th

The Securities Appellate Tribunal (SAT) has allowed former NSE chief Chitra Ramkrishna’s lawsuit against a SEBI order relating to stock market governance failures, ordering her to pledge an amount of ₹2 crore.

The Court of Appeal also ordered NSE to deposit more than £4million for the redemption of Ramkrishna’s leave and deferred bonus into an escrow account, contrary to SEBI’s instructions for the amount to be parked in the Investor Protection Fund Trust.

In an injunction dated February 11, SEBI had imposed a ₹3 crore penalty on Ms. Ramkrishna for alleged governance misconduct in a case relating to the appointment of Anand Subramanian as Group Operating Officer and Advisor when she was at the helm of NSE as is its managing director and chief executive officer.

The regulator had also asked NSE to deposit the redemption of Ms Ramkrishna’s £1.54million excess leave and £2.83million deferred bonus into the Investor Protection Fund Trust.

SAT passed a four-page order dated April 11 after accepting an appeal filed by Ms. Ramkrishna, saying various issues raised would be considered at the time the appeal was heard.

It also instructed SEBI to submit its response within four weeks. SAT listed the case for hearing on June 30.

“However, in light of the facts and circumstances on record and to balance the shares and expediency, we direct NSE to place … £4.73 million in trust for the complainant’s redemption of leave and deferred bonus deposit instead of depositing it in the Investor Protection Fund Trust,” SAT said.

It also noted that such deposit into escrow would depend on the outcome of the appeal.

In addition, SAT ordered Ms. Ramkrishna to deposit a sum of ₹2 crore within six weeks of April 11 for the remainder of the application.

Ms. Ramkrishna’s attorney, CS Vaidyanathan, challenged SEBI’s decision to levy a fine under Section 23A of the Securities Contract Regulation Act (SCRA).

He argued that because the provision was forward-looking, it could not be applied to offenses committed before the amendment act and that the penalty under this point was therefore “wrong and could not be upheld”.

According to the lawyer, SEBI issued the order without providing an opportunity for a hearing, in violation of Article 14 of the Indian Constitution.

He also argued that the regulator had no power to interfere with NSE Limited’s autonomy or internal management.

Aside from punishing Ms. Ramkrishna in the case of leadership failure, SEBI had imposed a penalty on Ms. Ramkrishna’s predecessor, Ravi Narain, and others.

In addition, Ms. Ramkrishna was banned from associating with any market infrastructure institution or SEBI-registered intermediary for a period of three years, while the same lasted for two years for Mr. Narain.

In its 190-page order issued Feb. 11, SEBI noted that Ms. Ramkrishna was guided by a “yogi residing in the Himalayan mountain ranges” in appointing Mr. Subramanian.

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