Dark fibre case: SAT sets aside Sebi order on NSE, ex-officials

Mumbai: The Securities Appellate Tribunal (SAT) on Wednesday set aside a Securities and Exchange Board of India (Sebi) order from April 2019 that had directed the National Stock Exchange to disgorge ₹62.5 crore along with interest in the so-called dark fibre case. It also removed the Sebi restriction on Sampark Infotainment providing connectivity services to stock exchanges.

The case pertains to alleged differential access given by NSE to certain broking firms over dark fibre, an already laid but unused or passive optical fibre unconnected to active electronics or equipment and does not have other data flowing through it. Sebi had said NSE provided connection to some members across its colocation facilities over such fibre.

“Sebi’s order directing the exchange to disgorge ₹62.5 crore cannot be sustained and to that extent, the order is quashed,” said a bench led by Justice Tarun Agarwala. The tribunal also asked Sebi to refund the money within four weeks.

Under Sebi’s 2019 order, 17 entities were penalised. The order had named former key officials including Chitra Ramakrishna, Ravi Varanasi, Anand Subramanian, Nagendra Kumar, and Deviprasad Singh, who were accused of providing preferential access to certain entities.

Ramakrishna was barred from holding any key position either in the management or the board, with any stock exchange or any Sebi-registered entity for three years. On Ramakrishna’s appeal, Justice Agarwala said directions of Sebi’s whole-time member were quashed.

Sebi had also said NSE officials did not verify the eligibility of Sampark Infotainment while granting it permission to lay the fibre for the brokers. Additionally, it found that the exchange decided not to follow its standard procedure of physically inspecting broker facilities at the BSE before approving Way2Wealth’s request for point-to-point (P2P) connectivity.

The regulator discovered that the exchange had prohibited other brokers from using Sampark connectivity prior to Reliance Communications assuming ownership of the infrastructure. Additionally, NSE prohibited the installation of fibre by other unauthorized vendors like Sampark.

Following this, the regulator directed Sampark not to offer, directly or indirectly, any new telecom services to any of the stock exchanges or to Sebi-registered entities for two years. The tribunal on Wednesday set aside such debarment.

The Sebi judgement had spoke of improper management, manipulation, irregular acts, absence of due diligence, misrepresentation and false statements in the dark fibre episode. “The way the co-lo facility has been mismanaged and manipulated by certain trading members with the active connivance of an unauthorised service provider and the officials of NSE, as evident from the discussions and observations made by me in the earlier paragraphs of this order, shows NSE’s apathy towards the principle of transparency, fairness and equity mandated by Sebi on them”, Sebi had said in its order.