Former NSE Chief Chitra Ramkrishna Arrested by CBI in NSE Co-location Scam
Moneylife Digital Team 07 March 2022
The Central Bureau of Investigation (CBI) on Sunday night swooped in and arrested the former National Stock Exchange (NSE) managing director (MD)  and chief executive  officer (CEO) Chitra Ramkrishna, accused of grave lapses at India's largest stock market including sharing confidential information with an individual she dubbed a ‘Himalayan yogi’.
 
CBI will produce her in the local special court of CBI cases in Delhi on Monday morning to seek her custodial remand in a case registered in May 2018, to probe the alleged abuse of the Exchange’s server architecture for granting preferential access of market data to a stockbroker, ahead of others.  
 
The arrest came just a day after a special court in Delhi dismissed her petition for a pre-arrest bail plea and pulled up the CBI for inaction and being 'lackadaisical' in the probe against her over the last four years. The development comes days after former NSE group operating officer (GOO), Anand Subramanian was arrested by CBI in the same case. His remand has ended on Sunday and so CBI will also produce him in the special court seeking the second remand for him.
 
In his order on Saturday, special CBI judge Sanjeev Aggarwal also observed observed that "despite being the capital market watchdog, SEBI has been too kind and gentle on the accused persons". The court's observations are bound to further embarrass  the Securities and Exchange Board of India (SEBI) which has faced scathing 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." 
 
Further prima facie this kind of co-location swindle could not have been possible without the knowledge and active connivance of all the functional heads of the NSE at the relevant time, this period can be considered as a 'dark period' in the history of NSE, the court said.
 
The court also came down heavily on the 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."
 
The CBI court refused to grant anticipatory bail to former NSE MD and CEO Chitra Ramkrishna 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 judge observed  though Chitra had deep roots in society and did not run away despite the CBI registering its FIR in 2018, she may influence and tamper with the evidence. The court dismissed the bail application, saying economic offences had deep-rooted conspiracies involving huge loss of public funds.
 
The order also revealed that the investigators roped in the services of a senior psychologist of the Central Forensic Science Laboratory after Ms Ramkrishna 'did not give proper responses' and 'evaded' questions posed by CBI sleuths over three days. 
 
The court noted that sustained custodial interrogation of Ms Ramkrishna would also be required to dig out the truth, as also by confronting her with Mr 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.
 
On 25th February, the CBI had confirmed that Anand Subramanian, the former GOO at NSE during Ms Ramkrishna’s tenure, was indeed masquerading as the mysterious ‘Himalayan yogi’ who allegedly influenced Ms Ramkrishna's decisions. His controversial appointment was one of the decisions that Chitra Ramkrishna took under the so-called yogi's influence, SEBI had said in a report.
 
In its 11th February order, SEBI has charged Ms Ramkrishna, who was the MD and CEO of the NSE from April 2013 to December 2016, and others with alleged governance lapses in the appointment of Mr Subramanian and his outsized promotion.
 
SEBI had levied penalties on Ms Ramkrishna, Mr Subramanian, and former NSE MD Ravi Narain on account of multiple violations, including irregularities in Mr Subramanian’s appointment as a Chief Strategic Advisor and his re-designation as the GOO and Advisor to the then NSE MD.
 
According to the SEBI order, Anand Subramanian ‘knew the said yogi’ and he was a major beneficiary of the person’s purported recommendations to Ms Ramkrishna. Prior to his appointment at the NSE, he also knew her. His wife worked as the regional head of NSE in Chennai. In January 2013, he was offered Rs1.68 crore for the post of chief strategic advisor, when his last drawn salary was Rs15 lakh. He received increments in quick succession and his compensation had shot up to about Rs5 crore by 2016.
 
The CBI case is against Delhi-based OPG Securities and others, including unknown officials of SEBI and the NSE. It has been investigating the ‘colocation scam’-  how the company’s top functionaries exploited certain loopholes in the Exchange’s server infrastructure and also conspired with the NSE data centre’s staff to gain preferential access to the market feed.
 
The SEBI order also said NSE and its board were aware of the interactions with the controversial adviser but had chosen to “keep the matter under wraps."
 
Subsequently, the income-tax (I-T) department also conducted searches on the premises of Ms Ramkrishna and Mr Subramanian in Mumbai and Chennai, while the CBI issued 'look out' circulars against the two and Mr Narain, following which their statements were recorded by CBI.
 
CBI reportedly arrested Mr Subramanian as he did not cooperate in the probe and refused to divulge the real identity of the 'Himalayan yogi' with whom he and Ms Ramkrishna had shared internal confidential documents of the Exchange during 2014-2016. CBI found that he had allegedly created the email account, [email protected], which was purportedly used by him  as a pseudo-identity (while masquerading as the Himalayan Yogi) to communicate with Chitra Ramkrishna.
 
The manipulation of the appointment process by an NSE committee (appointed by the board and including senior directors) and the details of colocation scam has been documented in the book Absolute Power by the editors of Moneylife Sucheta Dalal and Debashis Basu which was released in June 2021. 
Comments
pmbhate
3 years ago
She would have squealed like a rat that she is, were she been threatened with the third degree instead of merely being probed by a senior psychologist. She would have also achieved the impossible feat of making the bandicoot disguised as a Himalayan yogi sing like a lark. These financial terrorists deserve nothing less.
subodhtavkar
3 years ago
Both NSE and SEBI are wasting money on security at their offices in BKC Mumbai. At lease 6 to 7 guards man the gates and fraudsters fool the whole world under watchful eyes of security and all the controls.
sathya2011
3 years ago
This is akin to bolting the stable after horses escaped.
Nahom
3 years ago
Go after SEBI and MOF Bureaucrats involved in this scam.
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