‘The scam involved powerful people and influence is being used to scuttle the probe’.
New Delhi: The Central Bureau of Investigation (CBI), which has been probing the sensational allegations of illicit manipulation of the National Stock Exchange (NSE) between 2010 and 2014, has been faulted for not showing the needed zeal in bringing to book the main culprits behind the scam.
In May 2018, the CBI had registered an FIR against Sanjay Gupta, promoter of Delhi-based brokerage firm OPG Security Private Limited, his brother-in-law Aman Kokrady and Ajay Narottam Shah, along with “unidentified” officials of the NSE and stock market regulator SEBI and “unknown” government officials, who are alleged to have connived with the trio to get first access to the NSE market when they opened through misuse of technical facilities. According to officials, in the four-year period wherein these brokers got priority access to the NSE servers, Rs 50 crore each, by a modest estimate, were being siphoned off daily by many of those involved in the scam. “The money was siphoned off and invested in other markets and parked in other countries. It is a scam that involves humongous numbers, but the agencies have in effect turned a blind eye to it. Even the FIR was filed belatedly and the main culprits have still not been interrogated,” an official said.
As per the CBI FIR, this manipulation went on for four years in which the accused got access to servers ahead of other brokers by some seconds, which was enough to make a huge difference in the high-frequency algorithmic trading in the NSE, where an edge of a few seconds to a stock broker in a trade can make a difference of hundreds of crores of rupees.
However, the agency was able to file an FIR in the case only last May, more than eight years after the crime was committed, allegedly due to the pressure of influential individuals, including a Congress leader who headed crucial ministries during the time of the UPA-I and UPA-II. Senior officials aware of the developments said that the investigation in the case was now “stuck” as those who are involved in the scam seem to have succeeded in stalling further investigations with connivance with some serving and retired bureaucrats.
“Some preferred brokers were given unfair access to the NSE servers which enabled them to get data before any other broker. Who selected these brokers? The illegal profit that was siphoned off was shared among a (UPA era) minister apart from the top officials in the NSE management and in the Ministry of Finance. Initially, no case was filed despite the existence of solid proof. Now the agency (CBI) is under pressure to compound the offence so that the conspirators can go off easily,” a top government official stated.
He wondered: “Why are so many of the main accused in the case, including Secretary and Joint Secretary level bureaucrats, not being questioned? Who is protecting the guilty officers and what is the collateral reason for such a step? An inquiry into the attempted cover-up is a must.”
Sources said that there was “internal and external pressure” on the agency not to move ahead with the investigation or file chargesheet. A proper investigation would include interrogation of the officials who were served show-cause notice by market regulator SEBI, which would ultimately lead the agency to the minister and other top bureaucrats who the guilty were in constant touch with.
“Unless this loophole be plugged through necessary action, the guilty in the co-location scam will escape the way the 2G perpetrators did,” the official said. He warned that such an outcome would “shake confidence in the fairness of Indian stock markets globally”. The official said that as the investigation by SEBI reveals, in these four years, the selected brokers, who were known to the agencies, were able to login in 90% of the cases before any other broker. The trading was spread across Dubai, Singapore, Hong Kong and other locations on a daily basis.
The CBI FIR mentions that bribe amount was paid to “unknown” officials of NSE and SEBI by the accused which shows criminal misconduct on part of “unknown” public servants (read bureaucrats) for showing undue favour to these selected brokers.
After the scam was unearthed, the SEBI served show-cause notices to 14 officials, including Ravi Narain, vice-chairman and shareholder director on the board, Chitra Ramakrishna, ex-Managing Director, Anand Subramanian, ex-Group Operating Officer, Ravi Varanasi, Chief of Business Development, Mayur Sindhwad, Chief of Trading Operations, Shankar Sen Banerjee, CTO, Projects, Nandkumar M., Project Leader, G.M. Shenoy, CTO, NSE Infotech, Ravi Apte, ex-CTO , Suprabhat Lala, Vice-President, Nagendra Kumar, Chief Business Officer, Debt, Murali S., Umesh Jain, ex-CTO and Jagdish Joshi. However, till now, none of the political leaders or the bureaucrats has been questioned for their role in the scam, which could not have happened without their support. One of the accused mentioned in the CBI FIR, Ajay Narottam Shah, who is a close confidante of former Finance Minister P. Chidambaram, is married to Susan Thomas. Thomas is the sister of Sunitha, who is married to NSE’s then trading head Suprabhat Lala. Lala is among those who was served a show-cause notice by SEBI for his alleged role in the scam. “For 4 long years, the scam was happening right under the eye of experienced officials and bureaucrats like former SEBI chairman C.B. Bhave, who earlier, in an initial inquiry in the scam, had found no wrongdoing on the part of OPG or K.P. Krishnan, one the longest serving Joint Secretaries who was the Additional Secretary for the Capital Market, but no one noticed until a Singapore-based whistle-blower made this public. All these facts are in the public domain, but the CBI, it seems, is somehow unable to act in the manner needed,” a top government source said, stating that such an effort to cover up a scam involving thousands of crores “needs immediate attention by the PMO”.
Official sources said that since the scam involved very influential individuals and huge amount of money, influence is being used to scuttle the probe. Unless and until the probe is strictly monitored by the highest level of government, there was little chance of an inclusive and thorough chargesheet being filed in the NSE co-location case.