NSE Chief Performs Public Duty; Delhi High Court Rejects Former CEO Chitra Ramkrishna's Challenge To PC Act

The Delhi High Court on Thursday held that the Managing Director and Chief Executive Officer of the National Stock Exchange performs a public duty in which the public at large is invested.

It dismissed former NSE chief Chitra Ramkrishna's challenge to the constitutional validity of provisions of the Prevention of Corruption Act, the sanction granted for her prosecution, and the criminal proceedings arising out of the NSE co-location case.

A division bench of Justice Navin Chawla and Justice Ravinder Dudeja held that the National Stock Exchange performs a public duty as a recognised stock exchange operating under a statutory and regulatory framework. The bench noted that the exchange exercises regulatory functions over the securities market and functions under extensive governmental supervision. It concluded that the Managing Director and Chief Executive Officer cannot be separated from those public functions.

The bench referred to the National Stock Exchange's Articles of Association, which vest its Board of Directors with wide powers to organise, manage, regulate, and facilitate the exchange's operations.

Since the exchange acts through its officers, the court held that its Managing Director and Chief Executive Officer cannot be divorced from those statutory functions.

"The Board is, therefore, empowered to manage, regulate and facilitate the entire operation of the exchange, subject to, inter alia, the provisions of the SCR Act, the Rules framed thereunder, as also the SEBI Act. The NSE acts through its officers, including the petitioner. The petitioner, holding the office of the Managing Director and CEO, cannot be wholly separated from the functions performed by the NSE and, therefore, equally performs a function and duty in which the public at large is invested.", it ruled.

The case arose from the NSE co-location matter. The Central Bureau of Investigation alleged that between 2010 and 2014, certain brokers received preferential access to the exchange's servers. According to the chargesheets, Ramkrishna facilitated the design of a system that was susceptible to manipulation, allowing certain brokers to obtain preferential access to the exchange's servers.

The agency also alleged that she abused her position in connection with the appointment and remuneration of Anand Subramanian. After the trial court took cognisance of the chargesheets, Ramkrishna approached the High Court seeking to quash the proceedings.

Ramkrishna argued that officials of the NSE could not be treated as public servants because the exchange is a private company. She contended that the statutory definitions of "public servant" and "public duty" were vague and unconstitutional when applied to private persons.

She also challenged the validity of the prosecution sanction granted by the NSE Board, pointing out that the Board had expressly clarified it was not accepting that its personnel were public servants or that the Prevention of Corruption Act applied to the NSE.

Rejecting those submissions, the court held that the definition of "public servant" is neither vague nor unconstitutional. It observed that the law lays down clear conditions for determining whether a person falls within its ambit and that every office need not be specifically identified in the statute.

The bench also observed that a broader formulation was necessary to fulfill the object of anti-corruption legislation. It further held that recognised stock exchanges perform public duties in which the State, the public and the community at large have an interest. The court also noted that the Government exercises deep and pervasive control over the functioning of the NSE.

"Keeping in view the above object of the PC Act, we do not find any vagueness in the definition of 'public servant' as defined in Section 2(c)(viii) read with Section 2(b) of the PC Act. As observed hereinabove, the provision is specific and applies to a person who holds an 'office' by virtue of which he is empowered to perform a 'public duty', that is, a duty in the discharge of which the State, the public or the community at large has an interest. It has two specific preconditions: (i) holding of an office; and (ii) performance of a public duty by virtue of such office. It would have to be determined in each case whether the person, who has been charged under the PC Act, meets the above two preconditions. However, merely because every such 'office' has not been mentioned in Section 2(c) of the PC Act, the said provision cannot be termed as vague or uncertain, so as to be violative of Articles 14 or 21 of the Constitution of India.", the court ruled.

The court also rejected the challenge to the prosecution sanction. It held that the clarification recorded by the NSE Board made the sanction conditional only to the limited extent that the competent court would determine whether Ramkrishna is a public servant and whether the Prevention of Corruption Act applied to the NSE. That clarification, it held, was not a ground to set aside the sanction.

The bench further held that whether Ramkrishna, in the internal management of the NSE, can be said to be performing a public duty in relation to the acts alleged in the chargesheets and the extent of her role in the exchange's day-to-day functioning and policy decisions, are matters of evidence to be decided during trial.

It clarified that none of its observations should influence the trial court while deciding the case on the basis of the evidence led before it and in accordance with law

For Petitioner: N. Hariharan, Sr. Adv. with Rony John, Shivam Batra, Arshdeep Singh, Arpita Bhardwaj, Abhishek Bhushan, Mohd. Ibrahim, Amaan Shreyas, Punya Rekha Angara, Aman Akhtar, Vasundhara N., Sana Singh, Vasundhara Raj Tyagi, Arjan Singh Mandla, Prateek Bhalla and Mallika Chadha, Advocates

For Respondents: Chetan Sharma, ASG and Amit Tiwari, CGSC with Chetanya Puri, Ayushi Srivastava, Arpan Narwal, Kushagra Malik and Ujjwal Tyagi, Advocates for UOI Anupam S. Sharma, SPP with Harpreet Kalsi, Vashisht Rao, Ms.Amisha P Dash, Abhiyant Singh, Mayank Tyagi, Pragati Ojha and Pragya Nath, Advocates for CBI