High Court passes strictures against NSE & dismisses its appeal in the Sebastin case

As things stand, NSE and its top brass will face a criminal case in a lower court. But before that, the Exchange may approach the Supreme Court for relief

The Bombay High Court has dismissed a criminal application filed by the National Stock Exchange (NSE) for quashing and setting aside proceedings pending before the Mumbai Metropolitan Magistrate in the matter of A Sebastin. Mr Sebastin, a former employee of NSE, had filed a defamation case against NSE and its managing director Ravi Narain in the Mumbai Metropolitan Court over alleged character assassination. NSE, the Exchange with loads of funds at its disposal, had moved the High Court seeking a stay on the proceedings pending before the Metropolitan Magistrate.

Mr Sebastin, a compliance officer at the National Stock Exchange (NSE) who resigned in October 2008 to switch to the Multi Commodity Exchange (MCX), became a victim of the NSE’s wrath. The High Court, in its order issued on 25 March 2010, said: "… since the matter appears to be nothing but the result of an ego clash between the applicants and the respondent no.1, if an apology is published in the same newspapers in the same manner, it will give an end to the criminal litigation. While Mr Sebastin was ready to accept an apology and consequently to end the criminal litigation, the Exchange, on the other hand was not ready for the same.

On 25th March, the NSE filed an affidavit in the court stating that it is not possible for them to publish a fresh apology. Senior counsel Shirish Gupte, appearing for the NSE, reiterated the contentions which were made earlier and added that NSE had no intention to make any imputations on the character or efficiency of the complainant.

The Court specifically asked the Exchange whether it had published the clarification by way of an advertisement, as was done with the notice which is the subject-matter of the complaint, and also whether such a prominent notice, along with the photograph, has also been published in case of other employees who have either resigned or who are terminated from the services of NSE. The Exchange replied in the negative.

The Court order then said: "At least prima facie, the very fact that the complainant has been singled out for issuing such an advertisement along with a photograph and, further, the fact that the applicants themselves received various queries with respect to the said advertisement, would prima facie establish that the said advertisement has adversely affected the reputation of the present complainant."

The Court, while dismissing the criminal application filed by the NSE, said:"From a bare perusal of the complaint and from the documents placed on record by the applicants themselves, I am of the view that the ingredients so as to constitute an offence under Section 500 are prima facie made out in the present case and, as such, no case is made out for interference in the extraordinary jurisdiction of this Court under Section 482 of the Cr.P.C. Accordingly, the Criminal Application is dismissed." The High Court has extended the ad-interim relief granted to the NSE for a period of four weeks, starting 25th March.

According to sources, the NSE is planning to move the Supreme Court and will file an appeal soon. Since the Exchange is flush with funds, it can afford to fight a case of 'ego clash' (as mentioned by the High Court order). But the question is whether this is necessary. The NSE has, over the years, created a perception of being a government entity with its virtual monopoly. {break}

The Exchange's non-promoter executives, managing director Ravi Narain and deputy managing director Chitra Ramakrishna, had a gross annual income of Rs6.89 crore and Rs4.21 crore, respectively, besides other perks in 2008-09. The salary of Mr Narain was more than that of the London Stock Exchange (LSE) chief, Xavier Roulet (around Rs5.6 crore), and equal to that of the NYSE Euronext chief, Jean-Françoise Theodore (around Rs7 crore). Comparatively, NSE’s supposed competitor Bombay Stock Exchange’s (BSE) chief executive Madhu Kannan earned a gross income of Rs1.6 crore in the same period.

The Sebastin Case
On 6 April 2009, the NSE issued a ’public notice‘ in all leading business newspapers with the employee’s photograph announcing that anyone dealing with the “said Mr A Sebastin” would do so at their own risk.

Normally, such notices are published only if an employee is guilty of financial fraud or a serious betrayal of trust. However, there is no such mention. Instead, the NSE issued a clarification in response to media queries, saying that Mr Sebastin’s “services were terminated” because he ”had not met the company’s requirements.” It also indicated, without being specific, that the employee had failed to complete “severance” formalities.

Mr Sebastin, however, has evidence of a formal handover of charge, an exit interview and an email assurance that he would be relieved. He says that the public notice was issued after he sent a legal notice to the NSE on 4 April 2009, demanding severance benefits like Provident Fund (PF) and gratuity.

Holding back PF is illegal, so the NSE reportedly credited his PF account immediately after he served the legal notice but simultaneously issued him a termination letter followed by the public notice, almost six months after he had quit the Exchange.

When we published the case under the title of "Vindictive Action?" on our website www.suchetadalal.com, it received (so far) 28 comments from readers. One reader, Mr Golak, said: "NSE should try to find out why NSE ex-employees are willing to join MCX-SX and sort out the problems rather than take this kind of vindictive action. As an organisation, it has failed to come out of the whims of a few people who run the exchange on their own sweet terms."

Another reader, Satish Swaminathan, commented, "If there is attrition, then the HR should be pulled up for explanations and probably try to get to the root cause and address it. I also fail to understand how the NSE is proposing to beat its competition by stopping people and being vindictive when they join a competing firm."

"It is highly unethical behaviour by a highly professional company like NSE. Such a step by any company cannot be justifiable as employees are a company’s human assets and not physical assets," said SS, another reader.

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    1 decade ago

    At the moment I will not comment on the case or its outcome but will prefer to wait till end of 4 week period. But in all fairness, such cases complaining officer shud pay for the legal expenses
    from his personal funds. It is my experience, that even the employee's stand is vindicated, his life in all respect is ruined totally ruined. I will give just 1 example of famous MAKALU case of Air India. There are scores of such individual cases where headstrong executives of mighty organisations have victimised individual employee. More some other time.


    1 decade ago

    It is surprising that the media has not even bothered to mention this news. It is typical of how when competition come nearer in the form of MCX (equity trading), the top management (NSE) will not be able to withstand market forces. NSE has turned themselves into a monopoly, which is dangerous and before it is too late, i think the govt should bring out the competition of multi exchanges in commodity, currency and equity, which will be fulfilled by MCX.

    K B Patil

    1 decade ago

    No organisation with such an arrogant head can continue to prosper for a long time. If BSE spruces up its act, market participants will gravitate to it without any persuasion. Hope BSE wil use this opportunity to come up a worthy competitor to NSE.


    1 decade ago

    People with the exchange fraternity are aware that the NSE is run by some autocratic management. Attrition is quite and runs across all levels. Current management is almost NAZIsque and need to be replaced soo otherwise the second rung leadership will never develop. Several top level people have gone to MCX, NMCE, Dubai Exchange & even Singapore Exchange. Surprising that the foreign investors in NSE are also playing ball with this arrogant management


    1 decade ago

    Money and more Money makes you arrogant and Egoistic.
    The action of NSE in this case is nothing but arragance and Ego related.


    1 decade ago

    Money corrupts. BIG MONEY corrupts absolutely. The court should direct the NSE to pay the costs from the pocket of the people responsible for the case. But it is peanuts for those earning Crores, by over charging the Indian public! These same people sell the space near the NSE servers for Crores, to the highest bidders.


    1 decade ago

    These guys should not be allowed to use the Institution's funds to fight their own ego battles.This is happening regularly with Govt. and semi Govt. Organisations as well.

    MCX-SX cuts promoter’s stake to 10%; may enter equity trading soon

    With the completion of the MIMPS compliance, MCX-SX may soon enter the equity trading space dominated by two warring bourses, the NSE and BSE.

    MCX Stock Exchange Ltd (MCX-SX) said it has completed the shareholding compliance under the SEBI (Manner of Increasing and Maintaining Public Shareholding in Recognised Exchanges) Regulations, 2006 (MIMPS Regulations) in order to commence other segments of capital market, subject to regulatory approvals. This will allow the newest stock exchange to enter equity trading, subjected to regulatory approval.

    MCX-SX, promoted by Commodity Exchange (MCX) and Financial Technologies (India) Ltd was given a time till September 2010 to reduce promoter's shareholding to 10%. According to the new shareholding pattern, IFCI Ltd has emerged as biggest shareholder in MCX-SX with a13.23% stake, followed by Union Bank of India (11.5%) and Punjab National Bank (9.2%).

    MCX-SX has also expanded its board member to 18 from 12 and had inducted six nominees from banks and financial institutions. This includes Atul Rai, chairman and managing director, IFCI Ltd, Shahzaad Dalal, vice chairman, IL&FS, M Narendra, executive director, Bank of India, SK Dubey, general manager for treasury, Punjab National Bank, S Rajendran, general manager, Union Bank of India and CVR Rajendran, general manager, Corporation Bank.

    Market regulator Securities and Exchange Board of India (SEBI) had kept on hold an application of MCX-SX to commence equity trading for more than one and a half year due to the MIMPS compliance.

    With the completion of the MIMPS compliance, MCX-SX may soon enter the equity trading space dominated by two warring bourses, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

    According to regulations, no single entity, except other stock exchanges, depositories, banks, insurance companies and public financial institutions, can hold more than 5% in a stock exchange.

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    HDFC announces new dual-rate scheme, despite RBI diktat on teaser rates

    In yet another case of a regulator’s stance being thrown to the winds, HDFC has decided to ignore the Reserve Bank of India’s observations
    on teaser loans

    had earlier reported (see here) on how the RBI has repeatedly expressed its displeasure over teaser rates, saying that these schemes are unfair to existing borrowers.

    But HDFC has gone ahead and launched a new dual-rate scheme, despite the clear stance of the central bank.

    The financial institution today lowered its home loan rate to 8.25% for the first year in its dual-rate scheme, commonly known as a teaser loan, applicable on fresh loans.

    Under the scheme, the country’s biggest mortgage provider would offer a fixed rate of 8.25% up to March 2011, then 9% for the next one year and the prevailing floating rate for the remainder of the loan tenure.

    “This is a flexible product with dual rates. The fixed rates are applicable for all new loans irrespective of the loan amount,” stated HDFC.

    The teaser rates have been a major issue in the home-loan market in the recent past, with public sector lender SBI walking away with a big pie of the market through its own teaser rates. A number of lenders, including HDFC, had followed SBI last year in offering teaser rates, but most of these offers were discontinued earlier this year in a rising interest rate scenario.

    Although SBI has continued with its teaser rates, it had raised the effective interest rate on its scheme at the beginning of this month.

    SBI has extended its 8% special home loan scheme till 30th April, but revised the rate for the second and third years to 9% from 8.5% earlier.

    HDFC today said that besides the new dual-rate scheme, its existing floating rate product would continue without any change, where rates are 8.75% for loans up to Rs30 lakh, 9% for loans between Rs30 lakh and Rs50 lakh and 9.25% for loans of Rs50 lakh and above.

    Announcing the new scheme, HDFC managing director Renu Sud Karnad said that the company received “overwhelming” response to its earlier dual-rate offer and its cost of funds has now allowed launching a “lower initial fixed rate.”

    “This special offer is applicable to all new home-loan customers who apply before 30 April  2010, and take at least part-disbursement before 30 June 2010,” she added.

    Without naming SBI, HDFC said that the effective rate on its new scheme was “very attractive” and “much better than other large players in the market offering similar products” for a loan tenure of 15 or 20 years.

    SBI is the only other major player currently offering teaser home loan rates.

    “We would also allow the option to all customers whose loans are fully undisbursed as of 14th April to convert to this product without any conversion fees,” Ms Karnad said, adding that the special rates would also be available to NRIs, persons of Indian origin and self-employed customers.

    HDFC recorded a growth of 22% in loan approvals during the nine-month period ending 31 December 2009, to Rs44,110 crore, from Rs33,820 crore in the corresponding period last year.

    Loan disbursements during the nine-month period ending 31 December 2009, amounted to Rs33,527 crore compared to Rs27,211 crore in the corresponding period last year, representing a similar growth of 23%.

    The company said that its non-performing loans have also been declining on year-on-year basis for 20 straight quarters.

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    R Balakrishnan

    1 decade ago

    RBI has to issue a circular. Even then, it would not be applicable to housing finance companies, which come under the jurisdiction of NHB. RBI is not the licensing authority for HFC's.

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