May it please you, the Adjudicating Officer
Background
Upon receiving the Notice of Claim for the allegations against our client Mr. Suprabhat Lala, we
sent a response thereof. This therefore serves as a follow up argument notes that we shall use to
outline the arguments we intend to rely on in the defense of our client.
Our client is the head of administration at the National Stock Exchange of India. In the Notice of
Claim, it was alleged that our client violated certain provisions of the SEBI Act, SEBI
(Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market)
Regulations, 2003 (“FUTP Regulations”), and Securities Contracts (Regulation) Act, 1956
(“SCRA”).
The Notice of claim outlined an alleged connection and conflict of interest within the NSE. First,
the Notice states that Mr Ajay Shah is in charge of the algorithm for OPG Securities. It is further
alleged that certain services to OPG Securities were done by a company promoted by our client,
who is the Administration Head at NSE. The Notice also observes that our client’s wife, Ms.
Sunita Thomas (“Third Noticee”), who is also one of the Directors of lnfotech Financials Pvt Ltd
(“IFPL” or “Second Noticee”), is the sister of Susan Thomas who is wife of Mr Ajay Shah. The
Notice claims that Susan Thomas and Ajay Shah earn are given a percentage of trading and
earnings on NSE as royalty. Further, there was allegedly an exchange of confidential information
between our client and Ms. Sunita Thomas regarding the NSE.
Issues
There are three main issues in this case. The first one is whether there existed a conflict of
interest between our client and the Second Noticee. The second one is whether our client
misused and/or participated in the misuse of market related data of NSE. The last one is whether
our client colluded with any of the alleged Noticees.
Analysis
i. There was no conflict of interest between our client and the Second Noticee.
The Securities and Exchange Board of India in Order in the matter of NSE-Corporate
Governance in respect of NSE and others, WTM/SKM/EFD1-DRA-III/ 18/2019-20, held that
the only precaution required to be taken in order to avoid a conflict of interest, is that a director
or a functionary or shareholder must not participate in any discussion or decision in
respect of any matter in which he or she is in any way, directly or indirectly, concerned
or interested.
It is our position that our client’s role at the time he was in charge of trade operation, did
not involve awarding of contract for the LIX project. Instead, the awarding of the contract was
done by an Independent Committee that consisted of Mr. R Sundararaman, who was the vice
president of NSE 1 , and Mr. Yatrik Vin 2 . Besides, it is notable that our client did not report to the
said Mr. R Sundararaman. Further, Mr. Ravi Narian, the then Managing Director of NSE 3 and
Ms. Chitra Ramakrishna, the then Deputy Managing Director of NSE 4 testified that our client
had nothing to do with the issuance of the contract.
Contrary to the assertions against our client, IISL, which is a subsidiary company of
NSE, lacked the capacity to offer software development services 5 . Therefore, the committee
considered the foregoing factor in awarding the contract to the Second Noticee.
1 Contract commitment and Advance payment approval note dated January 13, 2009.
2 Delegation of authority by Board dated 27 April 2007].
3 Mr. Ravi Narian’s reply dated February 16, 2019, para. 8 & 16.
4 Ms. Chitra Ramakrishna’s reply dated February 20, 2019, para. 27.5.
5 NSE’s reply, page 10, para. 31.
We therefore maintain that the fact that the Third Noticee was a director of the Second
Noticee is immaterial since our client did not participate whatsoever in the award process.
Besides, the first purchase order was issued to the Second Noticee on May 12, 2003. Our client
married the Third Noticee on December 9, 2003.
Accordingly, we maintain that our client was not involved in any of the process of
awarding the contract to the Second Noticee and that for that reason, there existed no conflict of
interest.
ii. There is no prima facie case against our client that he shared potential confidential
information originating from NSE.
It is our position that our client did not misuses and/or participate in the misuse of market related
data of NSE. There is no material on record to suggest that our client was aware of any alleged
misuse, or that he ‘colluded’ with the other Noticees to provide data to Infotech only so that
such data could be misused. We further aver that in as far as our client participated in any
activity thereat, he was in full adherence to NSE’s data security instruments, to wit, the Data
Leakage Prevention Policy (“DLPP”) and the Data leakage Prevention Tool (“DLPT”). The
DLPT is set such that there are alerts in the event confidential/secret information is mailed or
printed or copied on USB. Accordingly, no alert was ever generated in the period our client was
employed at the NSE.
iii. Our client did not collude with any of the alleged Noticees.
Conclusion
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