Days after the central government denied former IAS officer Ajay Tyagi an extension of his term as the chairman of the Securities and Exchange Board of India (SEBI), a Delhi court today observed that "despite being the capital market watchdog, SEBI has been too kind and gentle on the accused persons" in the National Stock Exchange (NSE) co-location scam.
The observations are bound to further embarrass India's stock market regulator which has faced criticism for the delay in action in the case. The court also observed that the "magnitude of the present case may be huge, as due to this financial skulduggery huge loss may have been caused to adherent stockbrokers, institutional investors, foreign institutional investors and honest investors, whose faith in this premier financial institution - the NSE - may have been severely shaken and dented".
The court also came down heavily on the Central Bureau of Investigation (CBI), saying "the conduct of the investigating agency was most lackadaisical" and that "no action seems to have been taken against main beneficiaries of the present co-location scam, and others for almost four full years", even as they "seem to be enjoying merrily at the expense of common citizenry".
The order further noted that "there are many facets of the investigations which have to be excavated by the investigating agency after removing the dust of time over them".
Earlier today, the CBI court refused to grant anticipatory bail to former NSE managing director and chief executive Chitra Ramakrishna in connection with the NSE co-location case. Special CBI Judge Sanjeev Aggarwal observed that the accused were facing grave and serious allegations and that no ground for anticipatory bail was made out at this stage.
The order also revealed that the investigators roped in the services of a senior psychologist of the Central Forensic Science Laboratory after Ramakrishna "did not give proper responses" and "evaded" questions posed by CBI sleuths over three days
The CBI is likely to soon arrest Ramakrishna in the case. Co-accused Anand Subramanian has already been arrested by the CBI and is in police custody. The court noted that sustained custodial interrogation of Ramakrishna would also be required to dig out the truth, as also by confronting her with Subramanian.
The order also revealed that the Hyderabad-based Indian School of Business (ISB) had initially probed the allegations of the co-location scam and submitted a report way back in November 2017.
"ISB is carrying out further analysis of the financial irregularities of the brokers of NSE. This report is still awaited. The reports of these exercises is expected to further improve robustness of evidence which will require further analysis," the order noted.
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