SAT stays SEBI order against Ajay Shah, two others in NSE co-location case

PALAK SHAH Mumbai | Updated on May 09, 2019 Published on May 09, 2019

Balance of convenience lies in appellants’ favour, avers the appellate tribunal

The Securities Appellate Tribunal (SAT) granted interim relief to Ajay Shah, Sunita Thomas and Suprabhat Lala against SEBI’s strictures in the matter involving data breach and other violations at the NSE.

On April 30, SEBI invoked provisions of the Prevention of Fraudulent Trade Practices (PFUTP) against Shah and barred him from associating with companies or bodies in the capital market for two years. SAT observed in its order that the matter involving Shah and others dated back to 2009 and in 10 years there were no complaints against them and therefore, the balance of convenience was in their favour. SAT also stayed SEBI’s punishment against Infotech Financials, a company promoted by Shah’s sister-in-law Sunita Thomas, and her husband Suprabhat Lala, a top-rung NSE official.

SEBI recently came out with five different orders in the co-location scam and gave its verdict against various entities to whom it had issued show-cause notices in 2018. The notices also held Infotech Financials and Lala responsible for various violations at the NSE, along with Shah.

Appellants’ contentions

The SAT order issued on April 7, details of which were put out only today, showed “Shah contended that he is on the board of several committees and that if the order is allowed to continue, he would be removed from these committees and that his reputation as a financial advisor would take a bashing.”

Infotech Financials contended that they are in the business of preparation of algo trading software and if they are debarred for a period of two years their entire business would come to a standstill. It was also contended that they had no control over trading strategies adopted by their clients. Similarly, Lala contended “that the order against him will amount to termination of his service in the NSE”.

Considering the arguments by Shah, Infotech Financials and Lala, SAT said, “prima facie, at this stage, we are of the opinion that the alleged violation, if any, was in the year 2009. More than 10 years have elapsed and the appellants were associated with the market during this period and no complaint on any other score has been found against them. We also find that the data which is alleged to have been used by the appellants for preparation of algo trading software was explained by the NSE to be in the public domain in related proceedings made against the NSE.”

SAT further said, “The balance of convenience also lies in favour of the appellants for grant of an interim (stay) order.”

SAT said that once the replies are filed by the respondent (SEBI), it would consider whether the appellants had used their influence to get the contract from the NSE; appellants had violated the code of conduct of the stock exchange, or had violated the confidentiality clause under the agreement, or if there was a conflict of interest

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Published on May 09, 2019
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