The National Stock Exchange of India Limited
(NSE), in its draft red herring prospectus (DRHP) submitted to the Securities and Exchange Board of India (SEBI) on 17 June 2026, provided a comprehensive overview of its ongoing and resolved legal issues. The most significant relates to the prolonged colocation case, where NSE has proposed revised settlement terms of ₹1,491.21 crore to SEBI and has already recognised a provision of ₹1,391.21 crore in its FY25-26 accounts. NSE also pointed to concentration risks within its trading member base, noting that the top-10 trading members contributed 46.78% of its operating revenue in FY25-26. As a result, the Exchange's revenue stream remains significantly exposed to any slowdown, disruption, or reduction in business activity by these major participants, according to the DRHP.
Prepared by the law firm Cyril Amarchand Mangaldas, the 614-page DRHP marks the most detailed public disclosure by the country’s largest stock exchange regarding its extensive regulatory and legal challenges—a disclosure required under SEBI’s ICDR Regulations and notable for its thoroughness.
The Colocation Case: A Decade-long Regulatory Battle
SEBI’s whole-time member (WTM), in an order dated 30 April 2019, directed NSE to disgorge ₹624.89 crore with interest at 12% per annum from 1 April 2014 until actual payment. The order also included non-monetary and restrictive measures, such as barring NSE from accessing the securities market for six months. However, the WTM found that NSE did not violate the SEBI (Prohibition of Fraudulent and Unfair Trade Practices) Regulations.
Separately, in an adjudication order dated 10 February 2021, SEBI’s adjudicating officer (AO) imposed a ₹1 crore penalty on NSE related to the same colocation issues.
Regarding the Dark Fibre matter, the WTM order of 30 April 2019 required NSE to deposit ₹62.58 crore with interest at 12% per annum from 11 September 2015, along with additional audit and reporting obligations. Subsequently, SEBI’s AO, in an order dated 28 June 2022, levied a separate ₹7 crore penalty on NSE for Dark Fibre violations. This issue, involving an unauthorized service provider laying fibre on NSE premises, was initially reported exclusively by Moneylife.
As
reported by Moneylife in July 2022, the Dark Fibre matter featured prominently in SEBI’s penalty orders against NSE, Chitra Ramkrishna, Ravi Narain, Ajay Shah and four others.
The SAT Orders (2023)
NSE appealed both the orders before the securities appellate tribunal (SAT). In a significant development, SAT, through its order dated 23 January 2023, partially allowed NSE's appeal — it upheld the non-monetary directives in the WTM Order but set aside SEBI's direction for disgorgement. Instead, SAT directed NSE to deposit ₹100 crore in the Investor Education and Protection Fund (IEPF) for lack of due diligence. SAT also held that NSE was not in violation of Regulations 41(2) and 42(2) of the SECC Regulations. As
Moneylife reported at the time, SAT set aside the disgorgement orders against NSE, Ravi Narain and Chitra Ramkrishna.
In a further order dated 12 July 2023, SAT set aside the AO’s order entirely.
In the Dark Fibre matter, SAT's order dated 9 August 2023 reversed the disgorgement directive in the WTM Order. As
Moneylife reported, SAT directed SEBI to refund ₹72.58 crore to NSE, Way2wealth Brokers, and GKN Securities. Its subsequent order dated 14 December 2023 set aside the Dark Fibre AO Order.
As
Moneylife also covered, the tribunal quashed and drastically reduced penalties against 19 entities, including NSE's top executives.
SEBI Appeals to the Supreme Court
Aggrieved by both SAT orders in the Colocation matter, SEBI filed appeals before the Supreme Court of India — appeal I on 27 February 2023 (against the SAT order setting aside disgorgement) and appeal II on 13 September 2023 (against the setting aside of the AO order). The Supreme Court tagged the two appeals together through an order dated 30 October 2023.
The Supreme Court, through an interim order dated 20 March 2023, directed SEBI to refund ₹300 crore to NSE in connection with the Colocation WTM appeal, subject to an undertaking by NSE to repay the amount with interest should the appeal be decided against it. As
Moneylife reported, the Supreme Court declined to stay the SAT order and directed SEBI to make this refund.
Similarly, for the Dark Fibre matter, SEBI filed separate appeals (appeal I on 5 September 2023, and appeal II on 12 February 2024) before the Supreme Court. These were tagged together by the Supreme Court on 10 April 2024. The Supreme Court, through an interim order dated 17 October 2023, directed SEBI to refund ₹31 crore to NSE in the Dark Fibre WTM appeal, again subject to a similar undertaking.
All four Supreme Court appeals remain pending for final hearing and disposal as of the date of the DRHP.
Settlement Applications Filed
During the pendency of the Supreme Court appeals, NSE filed two separate settlement applications with SEBI on 20 June 2025 — one covering the Colocation WTM order and Colocation AO order, and another covering the Dark Fibre WTM order and Dark Fibre AO order — under the SEBI (Settlement Regulations) 2018. The initial cumulative settlement amount proposed was ₹1,387.39 crore. As
Moneylife reported in June 2025, NSE was readying a nearly ₹1,400 crore payout to SEBI to clear the decks for its long-awaited IPO.
Subsequently, on 13 March 2026, NSE filed revised settlement terms for a cumulative amount of ₹1,491.21 crore with SEBI in respect of both matters. The settlement applications are pending for final disposal with SEBI as of the date of the DRHP. NSE has stated that the future outcome of the settlement applications is "uncertain at this stage."
In the light of the pending settlement outcomes, NSE's board of directors resolved to defer other related legal proceedings. NSE recognised a provision of ₹1,391.21 crore in its financial statements for FY25-26, included under other expenses. This provision is in addition to the ₹100 crore imposed by SAT in the Colocation WTM appeal, which was adjusted against amounts deposited by NSE with SEBI during FY22-23. The DRHP notes that the statutory auditors have drawn attention to these matters through emphasis of matter paragraphs in their examination report — although no adjustments to the financial information are required.
A breakdown of the revised settlement applications is disclosed in the outstanding litigation section of the DRHP: for the Colocation matter, NSE filed revised settlement terms of ₹1,223.56 crore; for the Dark Fibre matter, the revised settlement terms stand at ₹267.65 crore, with both aggregating to ₹1,491.21 crore.
It is worth noting that SEBI had previously rejected an earlier settlement application from NSE in the colocation case, as
Moneylife reported in February 2024, before NSE eventually refiled.
OPG Securities: The Collusion Allegation
Pursuant to the SAT's January 2023 direction, SEBI issued a further show-cause notice (SCN) dated 17 May 2023, to NSE and certain of its employees and officials, alleging connivance and collusion between OPG Securities Private Limited and its directors with employees or officials of NSE in providing preferential access at the colocation facility. Through its whole-time member order dated 13 September 2024, SEBI held that there was a lack of sufficient evidence to establish any such connivance or collusion, and accordingly disposed of the SCN without any directions against NSE or its employees.
This order has been separately challenged before SAT by Chennai Financial Markets and Accountability, a public interest entity, through an appeal filed on 24 October 2024, seeking to quash the SEBI order and seeking appointment of an independent third party to reconsider the alleged collusion. NSE has filed a note challenging the maintainability of that appeal. The matter is currently pending.
Chennai Financial Markets and Accountability has also filed a writ petition dated 12 February 2025, before the High Court of Madras, challenging the settlement order dated 4 October 2024, in the TAP matter (discussed below). The petition seeks a writ of certiorari to quash the settlement order. The matter is currently pending.
The Governance and Conflict of Interest Matter
In parallel with the Colocation and Dark Fibre proceedings, SEBI's WTM order of 30 April 2019 also passed certain non-monetary and remedial directions against NSE in connection with governance and conflict of interest matters (Governance WTM order). SEBI's AO subsequently passed an order dated 30 June 2022 (Governance AO order), levying a monetary penalty of ₹1 crore on NSE.
NSE filed separate appeals before SAT against both orders but subsequently withdrew those appeals pursuant to a SAT order dated 24 July 2024. On 29 July 2024, NSE paid the ₹1 crore monetary penalty along with interest under the Governance AO order — a total outflow of ₹1.24 crore, including ₹0.24 crore interest — and updated SEBI on the status of its compliance with the non-monetary directions. This matter is treated as resolved in the DRHP.
Trading Access Point Settlement: ₹643.05 Crore Paid
A separate but significant enforcement action arose from SEBI's SCN dated 28 February 2023, issued to NSE and certain employees, in connection with the Trading Access Point (TAP) architecture and network connectivity. The notice alleged, among other things, the failure to take remedial measures to prevent possible bypass of the TAP system, delay in the appointment of a chief information security officer (CISO), non-implementation of an encryption feature in the TAP, and violations of the SEBI PFUTP Regulations, SECC Regulations, and other SEBI circulars. As
Moneylife exclusively reported on 1 March 2023, eight years after the Colo scam first came to light, SEBI served yet another notice in connection with the Colo scam and TAP architecture.
NSE filed a settlement application, which was processed by SEBI. Pursuant to a settlement order dated 4 October 2024, NSE paid a consolidated settlement amount of ₹643.05 crore — covering itself and nine others including former MD & CEO Vikram Limaye and eight other key management personnel, as
Moneylife reported in detail. The matter is categorised as resolved in the DRHP.
NSE notes that it appointed Rajesh Thapar as chief information security officer with effect from 6 June 2024.
Technical Glitch Settlement: ₹72.65 Crore Paid
SEBI issued a SCN dated 11 August 2021 to NSE, its subsidiary NSE Clearing Limited (NCL), and certain officers following a trading halt on 24 February 2021. On that day, disruptions in links with telecom service providers affected the storage area network (SAN) system, making the primary SAN inaccessible to host servers.
This caused a complete trading stoppage across all segments—including risk management, clearing, and settlement, index, and surveillance systems—for nearly five hours and 24 minutes.
SEBI’s notice cited non-compliance with the SECC Regulations and specific SEBI circulars. NSE and NCL submitted settlement applications, and SEBI issued settlement orders on 20 June 2023 and 28 June 2023. Together, NSE and NCL paid ₹72.65 crore—₹49.77 crore by NSE and ₹22.88 crore by NCL. The matter is now resolved.
Anand Subramanian Governance Matter: Settled
NSE received SCNs on 9 October 2019 and a supplementary notice on 16 December 2019, in connection with governance issues in the appointment of Anand Subramanian, who had served as the exchange's group operating officer. The notices alleged that NSE was in violation of regulatory compliance and general responsibility codes under the SECC Regulations and that there had been a delay in furnishing the nomination and remuneration committee's report to SEBI.
SEBI, through an order dated 11 February 2022, directed NSE to forfeit excess leave encashment of ₹1.54 crore and a deferred bonus of ₹2.83 crore and to deposit both amounts into the IEPF. NSE was also levied a monetary penalty of ₹2 crore and directed not to launch any new product for six months from the date of the order. NSE duly complied with all directions and paid the penalty amounts. The matter is treated as resolved.
STP Centralised Hub Settlement
NSE received an SCN dated 26 March 2021, in relation to alleged violations of the SEBI (STP Centralised Hub and STP Service Providers) Guidelines, 2004. The matter was settled pursuant to a settlement order dated 29 December 2021, for a settlement amount of ₹4.875 crore, which NSE duly paid.
Inspection Settlement: ₹40.35 Crore Paid
National Stock Exchange of India Ltd (NSE) paid ₹40.35 crore to settle enforcement proceedings related to lapses in data handling, outsourcing practices, and compliance failures. The settlement order, passed on 31 July 2025 by market regulator Securities and Exchange Board of India (SEBI), brings closure to a case stemming from SEBI's inspection of NSE for the period 1 February 2021 to 31 March 2022. The violations included outsourcing data storage without legally binding contracts, unauthorised distribution and sharing of confidential and unpublished price-sensitive information, gaps in client code modification practices, waiver of penalty without requisite approvals, and deficiencies in due diligence mechanisms. For full details of this settlement, read
Moneylife's report: NSE Pays Rs40 Crore To Settle Data Handling and Compliance Failure Issues.
Competition Commission Penalty: ₹55.50 Crore, Matter Pending
A long-standing dispute with the competition commission of India (CCI) also features in NSE's disclosure. The Metropolitan Stock Exchange of India Limited (MSEI, formerly MCX Stock Exchange Limited) filed a complaint with CCI on 16 November 2009, alleging that NSE held a dominant position in the stock exchange services market and abused it by engaging in predatory pricing in the currency derivatives segment.
CCI, through its order dated 23 June 2011, held that NSE was dominant in the currency derivatives segment and had abused its dominant position. It imposed a penalty of ₹55.50 crore, being 5% of the average turnover of NSE for the prior three years.
NSE challenged the order before the erstwhile competition appellate tribunal (COMPAT), which, through its order dated 5 August 2014, set aside certain parts of the CCI order but upheld the finding of abuse of dominance and the penalty. The COMPAT also expanded the scope of the relevant market to encompass all segments of NSE, not just the currency derivatives segment.
NSE filed a civil appeal before the Supreme Court on 16 September 2014. The Supreme Court granted an interim stay on recovery of the penalty amount through an order dated 23 September 2014. Separately, MSEI filed a compensation claim of ₹856.99 crore (plus 18% interest) before COMPAT, which was subsequently transferred to the national company law appellate tribunal (NCLAT) pursuant to the Finance Act, 2017. The Supreme Court stayed the NCLAT compensation proceedings through an order dated 12 February 2018.
Notably, in a related development,
Moneylife reported in February 2026 that the NCLAT upheld a CCI decision to close an abuse-of-dominance case against NSE specifically regarding co-location services.
All proceedings — the civil appeal before the Supreme Court and the compensation proceedings before NCLAT — remain pending. NSE has stated, on the basis of external legal counsel opinion, that it has strong grounds to contest the order and that no provision for liability in this regard is required.
Karvy Stock Broking: ₹2 Crore Penalty Pending Appeal
Regarding the default of Karvy Stock Broking Ltd, a former trading member, SEBI's adjudicating officer (AO) imposed a ₹2 crore penalty on NSE by an order dated 12 April 2022, citing alleged lapses by NSE in detecting Karvy's misconduct. NSE appealed to the securities appellate tribunal (SAT), which issued an interim order on 24 June 2022, staying the SEBI penalty. NSE’s appeal is still pending final hearing and resolution.
Separately, in the Karvy case, SAT on 20 December 2023 allowed appeals from Axis Bank, ICICI Bank, HDFC Bank, IndusInd Bank and Bajaj Finance, directing SEBI, NSE, and NSDL to either restore pledges made in favour of these banks or compensate them with the pledged securities’ value plus 10% annual interest within four weeks. NSE challenged this SAT order before the Supreme Court, arguing that SAT lacked jurisdiction to award compensation or restitution against a recognised stock exchange. The Supreme Court issued stay orders in January and September 2024 on the SAT order's operation against SEBI. The case remains pending. NSE has stated that no liability provision is necessary.
Related SCN on NSE Investments
NSE received an SCN dated 31 July 2020, alleging that investments made by NSE and its subsidiary NSE Investments Limited in certain entities engaged in activities unrelated and non-incidental to its function as a stock exchange were in violation of SECC Regulations. SEBI's AO levied a penalty of ₹6 crore through an order dated 1 October 2020. NSE appealed, and SAT set aside the AO order through its order dated 4 January 2022. SEBI has appealed that SAT order before the Supreme Court. Pleadings are complete. NSE states that no provision for liability is required.
Criminal Proceedings: Multiple Cases Pending
NSE is involved in several significant criminal proceedings, including:
- A criminal complaint filed on 16 April 2004 by Elegant Industries Pvt Ltd, alleging criminal breach of trust and conspiracy related to a property dispute. This case is still pending before the Bombay High Court.
- Eight criminal complaints lodged by Ramesh Chander Khanna in a Magistrate Court in Jalandhar against various trading members, with SEBI, NSE, certain directors and key management personnel also named. NSE is working on filing applications to remove the implicated directors and KMPs from these complaints. These cases are currently pending.
- A complaint by Ashutosh Yogesh Shah linked to the default of Anugrah Stock and Broking Pvt Ltd. The economic offences wing (EOW), in its report dated 15 April 2025, found no substantial evidence against NSE and its officials, resulting in no chargesheet being filed against NSE. However, the case remains pending before the Bombay High Court. Additionally, NSE has filed criminal complaints in various instances, including several cases related to ‘dabba trading’ activities against multiple individuals.
Contingent Liabilities: Tax and Other Disputes
Beyond the regulatory and litigation matters, NSE's contingent liabilities as of 31 March 2026 include:
- Claims not acknowledged as debts (other than matters specifically disclosed): ₹32.49 crore
- Disputed income tax demands: ₹866.79 crore
- Disputed service tax demands (including penalties): ₹160.40 crore
- Disputed Goods and Services Tax matters: ₹5.06 crore
- Group's share of associate contingent liabilities: ₹18.93 crore
- Bank guarantees provided by NSE Clearing Limited in favour of ICCL under the interoperability framework: ₹8,500 crore (as of 31 March 2026)
- Corporate guarantee given by NSE on behalf of its subsidiary NSEICC to Standard Chartered Bank for a bank guarantee facility of US$50 million (₹473.27 crore as of 31 March 2026)
NSE has stated that it has reviewed all pending litigations, made adequate provisions where required and does not expect the outcome of the proceedings to have a material impact on its restated consolidated financial information as of 31 March 2026.
Other Regulatory Matters and Civil Petitions
The DRHP also details several civil writ petitions involving NSE, including:
- A public interest litigation filed by N Arumugasamy in April 2021 before the Madras High Court, challenging the constitutional validity of the SEBI circular allowing stock exchanges to provide colocation facilities, and seeking a permanent suspension of NSE’s colocation services. This case is pending.
- A writ petition by Chennai Financial Markets and Accountability filed on 24 September 2019 before the Madras High Court, requesting a special investigation into alleged preferential access and early connection at NSE’s colocation facility. NSE has contested the petition’s maintainability. The matter is pending.
- A petition by Parinay Sharma, filed on 2 May 2026 before the Bombay High Court, alleging certain investors used Mauritius-based entities to conceal beneficial ownership in NSE and seeking, among other reliefs, a stay on NSE’s IPO process. This case is currently pending.
- Petitions by Balanoor Plantations and Industries Limited, Stewart and Mackertich Wealth Management, and others concerning regulatory and operational issues.
- Matters related to Reliance Infrastructure Limited, filed on 22 December 2025 before the Bombay High Court, challenging NSE’s classification of its equity shares under the Additional Surveillance Measures framework for IBC companies. This matter is pending.
- An unresolved dispute over whether NSE qualifies as a “public authority” under the Right to Information Act, 2005, stemming from a central information commission order dated 7 June 2007 declaring NSE a public authority. NSE has filed a letter patent appeal before the Delhi High Court, which remains pending.
Registrar of Companies Proceedings
NSE received SCNs dated 13 January 2026 from the Registrar of Companies, Maharashtra, for defaults under Sections 149(1) and 178(1) of the Companies Act, 2013. These related to the failure to appoint a woman director and to reconstitute the nomination and remuneration committee within the prescribed timelines. NSE attributed these defaults to the non-receipt of SEBI’s approval for director appointments which was beyond its control.
On 5 February 2026, the registrar of companies issued adjudication orders imposing penalties of ₹0.08 crore each on NSE and its managing director and CEO under one category, and ₹0.50 crore on NSE along with ₹0.10 crore each on the MD and CEO, former CFO, and former company secretary under another category. NSE and the other parties have appealed to the regional director, Western Region. The matter remains pending.
Statutory Auditor's Emphasis of Matter
The statutory auditors of NSE, in their examination report dated 8 June 2026, on the restated consolidated financial information for FY23-24, FY24-25, and FY25-26, have included emphasis of matter paragraphs drawing attention to the orders passed by SEBI in relation to preferential access to tick-by-tick data at NSE's colocation facility, Dark Fibre point-to-point connectivity, and governance and conflict of interest matters, along with the related adjudication orders. The auditors note that these matters remain subject to ongoing appellate proceedings, the outcome of which is uncertain, and that NSE has recognised a provision of ₹1,391.21 crore during FY25-26 in addition to the ₹100 crore adjusted during FY22-23. As
Moneylife has consistently documented, the Colo investigation has been marked by prolonged delays and unresolved questions about how the regulator has handled the matter.
Aggregate Outstanding Litigation Summary
As disclosed in the DRHP, the aggregate outstanding litigation involving NSE as on the date of filing is as follows:
Against NSE:
- Criminal proceedings: 18
- Tax proceedings: 43
- Regulatory actions: 6
- Material civil litigation: 21
- Aggregate amount involved (to the extent quantifiable): ₹2,605.67 crore
By NSE:
- Criminal proceedings: 23
- Material civil litigation: 5
- Aggregate amount involved: ₹4,039.57 crore
Against NSE's Directors:
- Criminal proceedings: 11
- Tax proceedings: 1
- Regulatory actions: 2
- Aggregate amount involved: ₹2.52 crore
Against NSE's Subsidiaries:
- Tax proceedings: 37
- Material civil litigation: 2
- Aggregate amount involved: ₹673.61 crore
The DRHP also flags one civil litigation involving NSE's associate NSDL, the outcome of which could have a material impact on NSE.
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The NSE Colo scam has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book Absolute Power: Inside Story of the National Stock Exchange’s Amazing Success, Leading to Hubris, Regulatory Capture and Algo Scam, released in June 2021. 
