Notice to SEBI, MCA and Enforcement Directorate in NSE co-location case : Madras HC

 The Madras High Court has admitted a Public Interest Litigation (PIL) filed by the Chennai Financial Markets and Accountability (CFMA) in the National Stock Exchange (NSE) co-location case and issued notices to the SEBI, the Ministry of Corporate Affairs (MCA), the CBI, Enforcement Directorate (ED) and the NSE. According to the PIL, SEBI has not taken any effective steps to unearth the scam, “one of the biggest financial frauds ever taken place”.

It has also issued notices to the Serious Fraud Investigation Office (SFIO) and the Financial Intelligence Unit (FIU). The High Court has directed the noticees to respond on November 11.

The petition stated that NSE has violated the fundamental objective inside the trading and thereby in the process and given illegal preferential access to certain trade members to access NSE trade data at the cost of entire securities market.

The order copy dated September 27 also said that the PIL brought to the knowledge of the court that the third respondent, the Central Bureau of Investigation (CBI) filed the first investigation report bearing “No.RC AC1 2018 A0011” on 28.05.2018, in relation to NSE co-location Scam and there appears to be a slow progress in the said investigation.

“We state that the NSE Colo Scam have tarnished the reputation of a major market infrastructure institution and severely challenged the integrity of the securities market. Millions of investors, mostly retail investors, would have suffered huge losses due to relatively delayed dissemination of order-book data to them and in the absence of the awareness that some select TM”s were able to access the order book data ahead of them,” the PIL said.

It further said that the terms of reference (TOR) for SEBI approved auditor and NSE approved internal auditor for the data centre and also the broker “OPG: must be investigated to see if they were adequate to unearth the illegalities and complicity and whether cognizance of all the findings of these auditors was taken by the authorities.

“Surprisingly this was not done by the 1st respondent SEBI at all,” it said. It also noted a slow progress in the CBI investigation into NSE co-location scam.

The co-location case dates back to 2015 when a whistleblower wrote to SEBI alleging that NSE was giving a few high-frequency traders and brokers preferential access to its trading platform which benefited both the parties at the cost of others.

The whistleblower had alleged that some trading member of NSE in collusion of employees or management of the exchange including preferential treatment to certain trading members to obtain faster access to market trade data.

The PIL further said: “It is shocking that the 1st Respondent (SEBI) had absolved the 7th respondent NSE and its officials of all allegations under the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations, 2003 (“PFUTP Regulations”) in the relevant SCNs.”

“It is submitted that when there is a serious fraud and misdemeanors committed by the top officials of the NSE who were acting hand in glove with the TMs towards manipulating the market and providing unfair trade access, NSE cannot be allowed to go scot free.”


SAT Stays SEBI Order Barring Prannoy Roy & Radhika Roy From Holding Directorial Or Managerial Positions In NDTV

In a temporary relief to Prannoy Roy and Radhika Roy, the Securities Appellate Tribunal has stayed the June 14 order issued by Securities and Exchange Board of India restraining them from holding manegerial or directorial posts in New Delhi Television Ltd (NDTV). Admitting the appeal filed by Roys and RPPR Ltd, the promoters of NDTV, the Appellate Tribunal yesterday observed that “a listed company which is managed by the appellants holding more than 61% of the total shares cannot remain headless”.

The Tribunal also criticised the SEBI for not supplying the certified copy of the order to the appellants. “In the instant case, we find that the whole world knows about the impugned order except the appellants. Till date they have not been supplied a copy of the impugned order in spite of the oral direction given by this Tribunal yesterday. We are constrained to observe that the system undertaken by SEBI needs a revisit. Their liability and their onerous duty does not end the moment they upload the order on their website”, observed the Tribunal.

The SEBI passed the order in a 2017 case filed by Quantum Securities Ltd, an NDTV shareholder, alleging that RRPR Holdings, Prannoy Roy and Radhika Roy didn’t disclose information about loan agreements entered into by them with Vishvapradhan Commercial Private Ltd (VCPL) and ICICI. According to the SEBI, “the loan agreements were unmistakably structured as a scheme to defraud the investors by camouflaging the information about the adversarial terms and conditions impinging upon the interest of NDTV’s shareholders, thereby inducing innocent investors to continue to trade in the shares of NDTV oblivious to such adversarial developments in the shareholding of NDTV” Roys argued that the agreements were for taking private loans in exercise of their shareholding rights and that since shareholders rights are personal property, the agreements did not affect NDTV or its operations in any manner.

They added that the loan agreements were private agreements in which NDTV was not a party, and hence, there was no requirement for the Noticees to make disclosure of the same to the stock exchanges. But this was not accepted by the SEBI, which found that they had agreed “to transfer a substantial controlling stake in NDTV to the VCPL behind the back of the shareholders of NDTV”. It ruled that the loan agreements were used to deceitfully transfers shares of NDTV upto 30 percent to VCPL without the knowledge of Board or its shareholders, amounting to unfair trade practice and was in stark violation of Section 12A of SEBI Act and Regulations 3(a), 3(b) and 4(1) of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Markets) Regulations.

SC takes note of deposit of Rs 710.22 cr by Sahara chief

SC takes note of deposit of Rs 710.22 cr by Sahara chief
SC takes note of deposit of Rs 710.22 cr by Sahara chief

The Supreme Court today noted that embattled Sahara chief Subrata Roy has deposited Rs 710.22 crore in the SEBI-Sahara account, but warned that its cheque of Rs 552.21 crore must be realised within the July 15 deadline.

The apex court rejected Roy’s request to extend time beyond July 15 for realisation of this cheque.

Roy had earlier told the court that he will pay Rs 1,500 crore on or before June 15 and Rs 552.22 crore exactly a month thereafter.

However, he had paid Rs 790.18 by June 15 and was granted 10 more days till July 4 for payment of Rs 709.82 crore by a bench headed by Justice Dipak Misra.

The apex court today noted that Sahara has deposited a total of Rs 1500.40 crore and now Rs 9,000 crore remained due on the principal amount of Rs 24,000 cr.

The bench also made it clear that it would not extend beyound July 15 the deadline for depositing Rs 552.21 crore and warned that appropriate action will be taken if the cheque is not realised.

The court also accepted the terms and conditions and the draft proclamation, prepared by Vinod Sharma, the official liquidator of the Bombay High Court, for auction of properties at Sahara’s Aamby Valley.

Earlier, the court had extended till July 4 the time to deposit Rs 709.82 crore, out of Rs 1,500 crore which was to be paid by June 15.

Prior to this, the court was irked over non-submission of money and had decided to sell off Rs 34,000 crore worth of properties of the Sahara Group at the Aamby Valley.

Roy has spent almost two years in jail and been on parole since May 6 last year. The parole was granted the first time to enable him attend the funeral of his mother. It has been extended since then.

Besides Roy, two other directors — Ravi Shankar Dubey and Ashok Roy Choudhary — were arrested for failure of the group’s two companies — Sahara India Real Estate Corporation (SIRECL) and Sahara Housing Investment Corp Ltd (SHICL) — to comply with the court’s August 31, 2012 order to return Rs 24,000 crore to their investors. Director Vandana Bhargava was not taken into custody.

( Source – PTI )

SC asks Sahara chief to deposit Rs 600 cr for staying out of jail

SC asks Sahara chief to deposit Rs 600 cr for staying out of jail
SC asks Sahara chief to deposit Rs 600 cr for staying out of jail

The Supreme Court today asked Sahara Group chief Subrata Roy to deposit Rs 600 crore more by February 6 next year in the SEBI-Sahara refund account to remain out of jail and cautioned him that in case of failure, he would have to return to prison.

A bench comprising Chief Justice T S Thakur and Justices Ranjan Gogoi and A K Sikri also said that it may consider appointing a “receiver” of properties if the group finds itself unable to sell them to pay back dues to the investors.

“If you (Sahara Group) are unable to sell properties, then the court would be comfortable to appoint a receiver,” the bench said, adding it also did not want to keep a person in jail.

The bench, initially, asked senior advocate Kapil Sibal, representing Roy, to deposit Rs 1,000 crore with market regulator SEBI in two months or it will appoint a receiver, but later reduced the money to be deposited to Rs 600 crore till February 6, 2017.

At the outset, Sibal said the group has deposited the money in pursuance of an earlier direction and filed a fresh re-payment plan to the court which asked senior advocate Arvind Datar, appearing for SEBI, and another senior advocate Shekhar Naphade, the amicus curiae, to file their response.

The bench said the case, which is pending since 2012, has a “history” and asked SEBI and the amicus curiae to respond to the question as to whether the group is entitled to any further benefit in its re-payment schedule.

The group said that it has assets to the tune of Rs 1.87 lakh crore and “now you are unable to pay the dues”, the bench observed and asked Sibal about the amount deposited by Roy after he came out of jail following the death of his mother.

“I have deposited Rs 1,200 crore after that,” Sibal said, adding, “Rs 11,000-odd crore has been deposited and around Rs 11,036 crore is remaining”.

Sibal, however, said as per SEBI, the dues are to the tune of Rs 14,000 crore.

Meanwhile, the bench said that the group may approach it for selling properties below 90 per cent of the circle rate.

( Source – PTI )

Participatory notes are regulated under the law: HC

Participatory notes are regulated under the law: HC
Participatory notes are regulated under the law: HC

Delhi High Court today said that Participatory Notes (P-Notes) are not illegal and were regulated under the law.

The ruling by a bench of justices Badar Durrez Ahmed and Sanjeev Sachdeva came while dismissing a PIL, which had claimed that Finance Minister Arun Jaitley had wrongly made a statement that P-Notes were not illegal and sought action against him.

The court passed the order after Additional Solicitor General (ASG) Sanjay Jain told the bench that P-Notes are part of Offshore Derivative Instruments (ODI) which are issued by or on behalf of Foreign Portfolio Investors (FPI) and are “generated, operated and destroyed” outside India.

The ASG also said that P-Notes were regulated instruments and placed before the court the SEBI (FPI) Regulations.

After going through the regulations, the court observed, “it appears that ODIs include P-Notes and such other instruments which are entered into by FPIs in relation to securities listed or proposed to be listed in stock exchanges in India”.

It also said that FPIs were functioning under a regulated regime.

With regard to the minister’s statement, the court said he had only stated no knee-jerk reaction would be taken with regard to stipulating or not stipulating any norms stricter than those already in place under the SEBI regulations on FPI.

The court also said that the special investigative team set up by Supreme Court to probe the black money issue had only suggested stricter norms for regulating P-Notes.

The court said that since the entire premise of the PIL by advocate M L Sharma was based on the premise that P-Notes were “illegal” and not regulated, his plea has no merit.

The court, however, did not impose any costs upon Sharma after he withdrew the personal allegations and innuendos he had made in the petition against the minister.

( Source -PTI )

SC gives Sahara 18 months to pay up Rs.36,000 crore

SC gives Sahara 18 months to pay up Rs.36,000 crore
SC gives Sahara 18 months to pay up Rs.36,000 crore

While approving the manner in which Sahara would furnish its bank guarantee, the Supreme Court on Friday directed that the group will have to pay the remaining liability it owes to the market regulator, Securities and Exchange Board of India (Sebi), within 18 months from the time its chief Subrata Roy is released.

Accepting the format of the bank guarantee brings Sahara a step closer to paying Roy’s bail.
Roy and two Sahara directors, in judicial custody since 4 March, need to deposit Rs.10,000 crore, half in cash and the rest in a bank guarantee.
A bench of justices T.S.Thakur, Anil R. Dave and A. K. Sikri enumerated conditions for the payment of the remaining liability of Rs.36,000 crore by Sahara within 18 months in nine instalments.
The first instalment has to be paid within two months of Roy’s release.
The court said that Roy would have to go back to jail if Sahara failed to pay any three instalments. Further, the Rs.5,000 crore bank guarantee would be liable to be encashed by Sebi if Sahara failed to pay any two instalments.
The court also asked the three Sahara officials to deposit their passports and seek the court’s permission before leaving the country.
The group can seek the court’s permission to sell any of its properties frozen by the court earlier.
While Roy’s release from Tihar jail is one of the primary focus of these hearings at present, the court has time and again emphasized that Sahara has to make payments, apart from the Rs.10,000 crore deposit.
Lawyer Kapil Sibal had in May sought the conditional release of Roy for six weeks in order to draw up a scheme for future payments.
In May, Sebi had told the court that Sahara has to refund nearly Rs.39,000 crore to it. Sahara has consistently disputed this sum. Sahara claims that it has refunded Rs.17,000 crore to about 30 million depositors directly.
Sahara has already deposited Rs.3,827 crore in cash with the Sebi Sahara Refund Account.
On 23 March, the apex court gave Sahara three months to raise Rs.10,000 crore, failing which it would arrange for selling off Sahara’s assets.
Sahara has filed a defamation case in a Patna court against Mint’s editor and some reporters over the newspaper’s coverage of the company’s dispute with Sebi. Mint is contesting the case.

SC refuses to release Subrata Roy on bail or parole

Subrata RoyThe Supreme Court today refused to release Sahara Chief Subrata Roy, who has been behind bars for nearly five months, on interim bail or parole but allowed selling of his luxury hotels in New York and London to raise money to deposit Rs 10,000 crore with SEBI as directed to get regular bail.

The apex court, however, assured 65-year-old Roy that it will allow him to go out of jail during day time under police custody to hold negotiations with buyers to dispose of his properties.

“There is, at present, no concrete proposal with Saharas’ for sale of the properties situated in India or abroad that may call for any negotiation by Shri Subrata Roy Sahara. While it may be true that such negotiations cannot be said to be advisable when properties of such magnitude as in the instant case are sought to be sold, yet it is premature for us to make any arrangement to facilitate any such negotiations either by directing release of Shri Subrata Roy Sahara on parole or otherwise,” a bench headed by Justice T S Thakur said.

The bench, also comprising justices Anil R Dave and A K Sikri asked him to approach the court when there is a proposal and assured him that suitable arrangements would be made by it.

“We may make it clear that if a situation arises in which negotiations become essential, this Court may consider passing orders to facilitate such negotiations. Beyond that we do not consider it necessary or proper to say anything at this stage,” it said.

The bench also rejected the plea of Roy for releasing him on parole on health grounds.

“There is nothing before us to show that Shri Subrata Roy Sahara suffers from any serious medical condition. At any rate, we expect the jail doctors to keep a check on his medical condition and provide necessary medical aid as and when required,” it said.

The bench, which had earlier allowed Sahara to sell nine properties in the country, permitted it to sell hotels Dream Downtown and The Plaza in New York and Grosvenor House in London.

It also appointed senior advocate Shekhar Naphade as amicus curiae to assist the court in dealing with the case in which the group is supposed to pay around Rs 37,000 crore to wind up the proceedings in the apex court.

“…Three offshore hotel properties owned by Saharas are allowed to be transferred, sold or encumbered subject to the condition that the entire sale consideration received by the Saharas after repayment of the loan outstanding towards the Bank of China is deposited with SEBI towards compliance with the directions contained in the conditional bail order dated 26.3.2014 passed by this Court.

“The excess amount, if any, shall be deposited by the Saharas in a separate account to await orders from this Court regarding their utilisation. The sale of the offshore properties shall not be at a price lesser than the value estimated by CBRE and JLL for the said properties reduced at the most by 5 percent of such value,” the apex court said.

Subrata Roy had pleaded that he be allowed to get out of jail on parole or on interim bail for at least 40 days to sell his properties to raise Rs 10,000 crore to get bail.

Roy, who was sent to jail on March 4 this year for non-refund of over Rs 20,000 crore to depositors, was asked by the court to pay Rs 10,000 crore to get bail, out of which Rs 5,000 crore in cash and rest of the amount in bank guarantee.

Sahara has so far raised Rs 3,117 crore which has been deposited with the market regulator.

The group, however, has been claiming that it has already repaid money to 93 per cent investors.

Senior advocate Rajeev Dhavan, who argued Roy’s plea, expressed his dismay over the outcome saying he never expected the new bench to take such a “strict view on a person who has been in incarceration for more than four months”.

“I am astonished and deeply pained by the orders of this court. I have not sensed justice like this,” he said.

However, the bench told the senior advocate that it was not altering the terms of conditions set by the previous bench for grant of bail and the order passed today has some portion which was in his favour.

“We could have reduced your astonishment if it had been an appeal… Your astonishment should be with another bench,” the apex court said while referring to the June 4 order passed by the bench of Justices K S Radhakrishnan (since retired) and J S Khehar.

Dhavan said, “I (Roy) came to this bench with good faith. I have already deposited Rs 3,000 crore. No person can be sent to jail like this.”

The bench said, “we decided the case in our wisdom and your client may not like it. But we allowed you to sell nine of your domestic properties and also allowed you to sell your off-shore properties”.

As soon as Dhavan stopped, the bench said, “should we take leave now”.

This did not go well with Dhavan, who told the bench “Don’t make fun of me. You gave me benefit of conversation”.

(Source: PTI)

Andhra HC lifts stay on Ranbaxy, Sun Pharma merger

sun pharmaShares of Sun Pharmaceutical Industries and Ranbaxy Laboratories are trading higher by up to 3% in early morning deals after the Andhra Pradesh High Court cleared the decks for the $4-billion deal to go through by lifting the stay.

The Andhra Pradesh High Court on Saturday vacated a status quo order it had issued earlier on Sun Pharma-Ranbaxy merger process, paving the way for the pharma giants becoming a single entity, the PTI report suggests.

In order, vacation judge G Chandraiah said there was no need for the status quo, as Sebi was already inquiring into the insider-trading allegations and the process of merger was outside the purview of this probe, added report.

Ranbaxy Laboratories has surged 5% to Rs 460, while Sun Pharma gained nearly 4% to Rs 607 on the Bombay Stock Exchange.

(Source: PTI)

Daiichi plea HC to vacate Sun-Ranbaxy merger stay

DaiichiDaiichi Sankyo, owner of Ranbaxy Laboratories Limited, has filed a petition in Andhra Pradesh High Court requesting it to vacate the ‘status quo’ order it issued earlier on Sun Pharma-Ranbaxy merger process.

The HC may take up hearing on the petition on May 15.

Based on a petition filed by two individual investors, the court on April 25, issued interim ‘status quo’ orders on the merger process.

The petitioners alleged that there was heavy trading of Ranbaxy stock before the merger with Sun Pharma was announced on April 6, and requested the court to direct the SEBI to investigate the insider trading of Ranbaxy shares and take appropriate action against Sun Pharma and Silver Street.

Daiichi, in its petition filed last week requesting the court to vacate its earlier order, contended that the petitioners (investors) had approached the court without exhausting the alternative remedies.

The Japanese drug major also pointed that various courts in the past have acknowledged that Securities and Exchange Board of India (SEBI) is the appropriate and competent body to look into matters such as insider trading.

“I submit the present petition (filed by investors) is not maintainable because the petitioners have approached this honourable court without exhausting any of the alternative remedies available to the petitioners and all such alternative remediates and effective efficacious.

“I submit that respondent one (SEBI) is an expert body constituted under the Securities and Exchange Board of India Act, 1992 (the SEBI Act), and an investigation involving an allegation of insider trading is highly technical, requires professional expertise, deep knowledge of securities law, and is a fact-based finding,” Daiichi said.

The drug maker also said that the petitioners have intermingled two separate issues – insider trading and merger process of Sun Pharma and Ranbaxy.

“It is submitted that the two issues are independent of each other and one has no bearing on other. It is submitted that the allegations in the writ petition pertain alleged charges of insider trading only. The petitioners have not made any amendments in the writ petition against the scheme of this arrangement,” it said.

Mumbai-based Sun Pharma had announced on April 6 that it would fully acquire Ranbaxy in an all stock transaction with a total equity value of USD 3.2 billion, along with debt of USD 800 million taking the overall deal value to USD 4 billion.

The combination of Sun Pharma and Ranbaxy creates the fifth-largest speciality generics company in the world and the largest pharmaceutical company in India.

Daiichi requested the court to dismiss the writ petition filed by the investors and also pass order vacating the status quo order.

(Source: PTI)

Supreme court to hear Sahara Group proposal

sahara shreeThe Supreme Court will on Friday hear a proposal by the Sahara Group to pay SEBI a substantial amount as surety to return investors the Rs.19,000 crore it had collected through Optionally Fully Convertible Debentures.

Senior counsel Rakesh Dwivedi, appearing for the Sahara Group, told the apex court bench headed by Justice K.S. Radhakrishnan that the group wishes to submit a substantial amount in a month and said the rest of the amount will be paid subsequently.

Counsel urged the court for an early hearing.

The court directed the Sahara Group to submit its proposal to the Securities and Exchange Board of India (SEBI) and asked the market regulator to respond when the matter comes up for hearing Friday.

(Source: IANS)