The Supreme Court on Thursday disposed of the Securities and Exchange Board of India’s (SEBI) appeals against the National Stock Exchange (NSE) in the long-running co-location and dark-fibre cases, removing a major regulatory overhang as the country’s largest stock exchange moves towards its much-awaited public listing.
A two-member Bench of the apex court disposed of SEBI’s appeals after the parties reached a settlement of ₹1,491.21 crore covering both cases, without admission or denial of guilt.
“The Supreme Court’s disposal of this decade-long litigation is the ultimate green light for the National Stock Exchange,” said Amit Tungare, Managing Partner at Asahi Legal. “This extinguishes the primary institutional overhang that has stalled its public listing for years.”
Co-location cases
The co-location case dates back to 2015, when the market regulator received complaints that some brokers using NSE’s co-location facility were given an unfair advantage in accessing the exchange’s tick-by-tick data. In April 2019, SEBI directed NSE to disgorge ₹624.89 crore with interest, along with other restrictions.
In the related dark-fibre case, SEBI alleged that two brokers received an advantage through point-to-point connectivity between their NSE and BSE co-location facilities and ordered disgorgement of ₹62.6 crore plus interest.
The Securities Appellate Tribunal subsequently set aside the disgorgement orders in both cases, prompting SEBI to approach the Supreme Court.
“The order removes perhaps the most significant historical regulatory overhang on NSE’s IPO, but it is not a clean chit to every individual associated with the co-location episode,” said Tushar Agarwal, Founder and Managing Partner, C.L.A.P. JURIS, Advocates & Solicitors.
The position of former officials, including Chitra Ramkrishna and others, has to be considered separately. NSE’s settlement does not automatically extinguish individual regulatory or criminal proceedings. The CBI’s co-location investigation, for instance, is a separate track.
“NSE’s settlement does not automatically extinguish personal proceedings, penalties, appeals, criminal investigations or proceedings against individuals,” said Alay Razvi, Managing Partner at Accord Juris. “Their liability must be determined independently, based on the allegations, evidence and orders applicable to each person.”
For NSE, therefore, Thursday’s disposal marks a significant step towards its IPO, while the legal position of former officials must be assessed separately.
In July, NSE completed the settlement of the agreed ₹1,491.21 crore under the revised settlement terms. The exchange had filed its draft red herring prospectus with SEBI in June, comprising an offer for sale of 14.89 crore equity shares, or 6 per cent of its paid-up capital.
NSE’s listing plans have been in the works for years and have faced regulatory hurdles, including those arising from the co-location and dark-fibre cases. The IPO process picked up pace this year after SEBI gave NSE a no-objection certificate, followed by in-principle approval. The final observation letter is still awaited.
NSE is currently valued at around ₹5 lakh crore in the unlisted market and is expected to be among India’s largest IPOs, with the offer size estimated at around ₹30,000 crore.