Opg Securities Pvt. Ltd. vs Sebi

Order Reserved on: 3.4.2019 Date of Decision : 1.5.2019

Misc. Application No.40 of 2019 And Appeal No.246 of 2017

OPG Securities Pvt. Ltd. OPG House, 4/10, Asaf Ali Road, New Delhi-110 002. ..... Appellant

Versus

National Stock Exchange of India Ltd. Exchange Plaza, Plot No.C/1, 'G' Block, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. ...... Respondent

Mr. Gaurav Joshi, Senior Advocate with Mr. Saurabh Pikale, Mr. Ravichandra Hegde, Mr. Robin Shah, Mr. Mitravinda Chunduru and Mr. Yash Bajaj, Advocate i/b Parinam Law Associates for the Appellant.

Mr. P.N. Modi, Senior Advocate with Mr. Rashid Boatwalla and Mr. Rahul Jain, Advocates i/b. Manilal Kher Ambalal & Co. for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M.T. Joshi, Judicial Member

Per : Justice M.T. Joshi

1.

Vide impugned order of the respondent NSE dated

4th September, 2017, the appellant is suspended for six months

as a trading member on all segments on the respondent

Exchange.

2

2. The record would show that on 31st August, 2009, the

respondent introduced co-location server at its premises for

better use of Algo trading (trading through a computer program)

on payment of service fees etc in terms of circular 693 issued by

it on 31st March, 2009. The purpose of providing co-location

services was to speed up the trading facility through master

server and the racks were allotted to the subscribing trading

members. The appellant has subscribed for the said facility.

It is the case of the respondent NSE that as a part of

contingency plan the respondent had provided secondary/ fall

back server which members were supposed to connect only in

case the first server fails or were down. The said facility was

provided to enable the members not to lose any data in case of

difficulties in communication and in obtaining data from the

primary server of the respondent. The respondent however

found that the present appellant had logged into the second

server frequently and obtained data without any valid reasons

even though repeated warnings were issued to it. In the

circumstances, the respondent issued show cause notice to the

appellant dated 14th February, 2017 to show cause as to why

necessary disciplinary action should not be taken as per Rule (1)

and 3(c) of Chapter IV of the Exchange Rules. 3

3. It is submitted by the appellant that constant problems and

technical glitches were found in the primary server which

compelled the appellant to switch to the secondary server.

These problems were reported to the respondent from time to

time. It has used secondary server as a contingency means and

not to gain any advantage. No specific terms was mandated for

the use of the secondary server. The use of server by all the

members was monitored by the respondent from time to time.

As per the respondent's co-location guidelines itself the

members were required to check the secondary TBT parameters

were working fine with their applicability. In case of non

receipt of data through primary server they were free to move to

secondary server. i.e., fall back server. Log in credentials for

the secondary server were also provided. Detailing some other

facts it was requested that the show cause notice be withdrawn.

4. The disciplinary action committee of the respondent took

up the matter. It found that instructions were already issued to

the members to connect to the secondary server only in case of

failure of primary server. According to the Committee various

emails were exchanged between the appellants and the

respondent to stop the use of secondary server frequently and

finally a warning was issued vide email dated 7th June, 2012. It

further found that a forensic investigation in the issue was got 4

done through one Deliotte Touche Tohmatsu LLP by the

respondent. The report of this forensic investigation brought to

light certain adverse findings as to the conduct of the present

appellant. The extract of the said report was already forwarded

to the appellant. Thus, finding that the present appellant has

from time to time used the secondary server without their being

any problem in the primary server, the impugned order was

passed by the Committee.

5. Before us several submissions were made by both the

sides. Learned counsel for the appellant submitted that full

report of the forensic investigation was not provided to it. It is

further pointed out that during the pendency of the present

appeal SEBI had also started investigation qua the present

respondent regarding use/misuse of the co-location facility by

various members.

The learned counsel for the appellant, at the time of

hearing, submitted extract of some report purportedly prepared

by Earnest and Young LLP in the same issue. According to the

learned counsel for the appellant the said report depicts a

different picture. Learned counsel for the respondent submitted

that all the material including the report is being examined by

SEBI.

5

5. In our opinion, in view of the fact that another forensic

investigation report has come up it would be in the interest of

justice that the impugned order be quashed and set aside and the

matter be remanded to the respondent Stock Exchange to have a

fresh look in the matter. Hence the following order:-

1. The impugned order is hereby set aside.

2. The matter is remanded to the respondent National

Stock Exchange of India Ltd to take a fresh decision in the

matter. The respondent will consider the forensic report or

any other additional relevant material and pass a fresh

order within six weeks from today after giving an

opportunity of hearing to the appellant.

3. Misc. Application for interim relief stands disposed

of.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C. K. G. Nair Member

Sd/-

Justice M.T. Joshi Judicial Member

1.5.2019 Prepared and compared by RHN