SAT Rejects Chennai Society's Challenge To SEBI Order Clearing NSE Officials In Co-Location Case

The Securities Appellate tribunal (SAT) has dismissed an appeal by Chennai Financial Markets & Accountability seeking a fresh examination of alleged collusion between OPG Securities and NSE officials in the co-location case.

It held that the society was not an "aggrieved person" entitled to invoke the tribunal's appellate jurisdiction.

A coram of Presiding Officer Justice P.S. Dinesh Kumar and Technical Members Meera Swarup and Dr. Dheeraj Bhatnagar passed the order.

“Section 15T of the SEBI Act provides that 'any person aggrieved' by an order of the Board may prefer an appeal before this Tribunal,” the tribunal observed.

Chennai Financial Markets & Accountability, a society registered under the Tamil Nadu Societies Registration Act, challenged SEBI's September 13, 2024 order. The order had been passed after the matter was remanded by SAT in the NSE co-location case.

The society contended that SEBI had not fully complied with the remand directions. It sought a fresh examination of allegations that OPG Securities and its directors had colluded with NSE officials.

It also sought reconsideration of issues relating to the alleged concealment or destruction of information. Another grievance related to the alleged crowding out of other market participants.

The society further sought the appointment of an independent committee. It also wanted material gathered in the CBI's investigation into the matter to be considered.

The dispute traces its origin to a whistle-blower complaint lodged with SEBI in January 2015. Following an investigation, SEBI passed separate orders in 2019 against the National Stock Exchange and OPG Securities.

OPG and its directors were found guilty of obtaining unfair access to secondary servers. They were penalised more than ₹15 crore. NSE and its officials were cleared of allegations of connivance and collusion.

In January 2023, SAT directed SEBI to reconsider the allegation of connivance and collusion between OPG and NSE officials. It also directed reconsideration of alleged concealment or destruction of information and the issue of crowding out of other market participants.

After issuing a fresh show-cause notice, SEBI passed a new order in September 2024. It closed proceedings against NSE and its employees. At the same time, it enhanced the penalty imposed on OPG to more than ₹85 crore.

SEBI opposed the appeal. It contended that the society had suffered no legal injury. It further argued that SAT could not entertain what was effectively a public interest litigation.

The tribunal accepted the objection. Referring to its earlier ruling in the NSE co-location matter involving advocate A. Kumar, it noted that the society was neither an investor nor a person who had suffered any loss.

“Admittedly, the appellant is neither an investor nor suffered any loss. There is no lis between appellant and NSE,” the tribunal observed.

The tribunal noted that its earlier decision had already held that a person unconnected with the securities market could not maintain an appeal. The same applied to a person whose interests were not affected by the impugned order.

It also rejected the society's reliance on Rule 21 of the Securities Appellate Tribunal (Procedure) Rules, 2000.

“In our considered opinion, appellant is not an 'aggrieved person', therefore, this appeal is not maintainable under Section 15T of the SEBI Act,” the tribunal held.

Holding that there was no occasion to invoke its powers under Rule 21, the tribunal dismissed the appeal as not maintainable.

For Appellant: Advocates Nithyaesh Natraj and Rutu V Pawar

For Respondents: Advocates Vishal Kanade, Manish Chhangani, Sumit Yadav, Abhay Chauhan, Atul Agrawal, Abhishek Venkatraman, Anusha Jegadeesh, Prabhav Shroff, Harshit Jaiswal, Isha Patil, Robin Shah, Rashid Boatwalla and Pranav Kethineni