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

Yogesh Sapkale

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.

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.

(Courtesy: Moneylife.in and SuchetaDalal.com)