SAT Overturns Rs 3-Crore Penalty On Former NSE CEO Chitra Ramakrishna

The Securities Appellate Tribunal has overturned a penalty of Rs 3 crore imposed on Chitra Ramakrishna, former chief executive officer of the National Stock Exchange.

The appellate tribunal said the direction to debar Ramakrishna could not be sustained, and at most, a penalty could be imposed.

The charges against Ramakrishna included violations of Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market (PFUTP) Regulations, SEBI Act, SEBI Master Circular, SECC Regulations, and SCRA, leading to the penalty.

The appellate tribunal's order from Aug. 9 found Ramakrishna negligent in her duties as the managing director and CEO of NSE, specifically in failing to exercise due diligence regarding Sampark Infotainment Pvt.'s license for P2P connectivity.

The SAT acknowledged that while Ramakrishna may not have had a specific role in permitting service providers or setting up equipment in NSE colo services, her lack of awareness regarding the license of the service provider could not absolve her of responsibility.

The appellate tribunal held that, as the head of NSE, she was morally responsible for any violations of the institution's policies committed by functional heads and subordinate officers.

Despite NSE's organisational structure with multiple verticals and 450 employees, the SAT emphasised that the day-to-day operations and policy implementations were overseen by responsible functional heads.

The lack of due diligence and negligence by NSE in verifying Sampark's license led the appellate tribunal to conclude that Ramakrishna, as the MD and CEO, was morally responsible for the lapse.

However, the SAT clarified that NSE did not breach PFUTP provisions, and charges of preferential treatment against NSE were not sustained. Consequently, it set aside the order of debarment against Ramakrishna.

Finally, the SAT canceled the penalty imposed on the former CEO, for violating securities market regulations and also found that the Rs 1 crore penalties for other specific violations were arbitrary and excessive, lacking proper justification and consideration of relevant factors.

Considering the circumstances, SAT deemed a cumulative penalty of Rs 25 lakh to be fair and appropriate.