These sources added that the bourse acted like an ‘opaque entity’ and flouted numerous norms, including breaching employees’ right to privacy by tapping their lines, awarding contracts to firms with no previous experience or past records, snapping the surveillance system once the co-location scam broke out and subsequently disposing it off as e-waste.
Last week, the Central Bureau of Investigation (CBI) registered a case against the former NSE chiefs Chitra Ramkrishna, Ravi Narain, iSec Services and the former Mumbai police commissioner, Sanjay Pandey, who floated the firm along with others. The federal agency is also probing Ramkrishna, Narain, and unnamed NSE and Securities and Exchange Board of India (Sebi) officials in the alleged irregularities in the co-location facility extended by the bourse to a select few brokers between 2009 and 2014.
“In their preliminary statements recorded during the course of the searches, both Ramkrishna and Narain have allegedly told the investigators that the contract was awarded to a ‘little known’ company based on recommendation and did not follow bidding process. The said the firm had no prior experience and expertise but since it came through a recommendation and the company was incorporated by a police officer (by Pandey, when he had quit the service), NSE decided to go ahead with it,” said a senior official privy to development.
“However, even after Pandey exited the firm and joined back the Indian Police Service (IPS), multiple bills, invoices and communications from NSE addressed to ‘Sanjay Pandey’ on behalf of the firm have been recovered. This is strong evidence that while the firm was operated by his family members, it was Pandey who was controlling it,” the official said.
On NSE, the probe has revealed that in the aftermath of the co-location scam breaking out, the exchange never mandated the auditor, EY India, to probe the company. “The exchange was duty-bound to conduct a complete investigation into the affairs of the company once allegations were made. It, however, never mandated the auditor to probe every contract, including the one entered with iSec Services. It is being investigated on whose request was the scope limited and why none of the former senior executives at the exchange never raised any red flags,” added the official.
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