Supreme Court ticks off NSE’s bullying tactics; NSE and MD Ravi Narain will face criminal case in metro court   

April 27, 2010

 The National Stock Exchange (NSE) and its top brass are finally going to face a criminal case in the Mumbai Metropolitan Court, after the Supreme Court dismissed its petition requesting to quash the orders of the Bombay High Court in the case of its former employee A Sebastin.

Earlier, the Bombay High Court had dismissed a criminal application filed by the NSE for quashing and setting aside proceedings pending before the Mumbai Metropolitan Magistrate. After losing appeal—and face—in the Supreme Court, the NSE & its managing director Ravi Narain will now face the lower court in a case of criminal defamation brought by Mr Sebastin. A Supreme Court bench comprising Justice P Sathasivam and Justice HL Dattu, said that the High Court had earlier granted one opportunity to NSE to tender an apology but it did not do so and the bourse should be ready to face action. “It is high time that the institution and the management realise the reputation of its employees,” the apex court said.

Mr Sebastin, a compliance officer with the NSE, had resigned from the bourse in October 2008. Later he joined Multi Commodity Exchange (MCX) and came under a nasty personal attack by the NSE. On 6 April 2009, the NSE issued a ‘public notice’ in all leading business newspapers with the former employee Mr Sebastin’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. (For more details of the case that is fast acquiring notoriety see “The Sebastin Case” below).

After Mr Sebastin filed a case against the NSE and its managing director Ravi Narain in the Mumbai Metropolitan Court over alleged character assassination, NSE approached the Bombay High Court for quashing and setting aside proceedings pending before the Mumbai Metropolitan Magistrate. The High Court dismissed the application and in an order issued on 25 March 2010, said: “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, an ego-driven, powerful and extremely wealthy NSE, on the other hand, was not ready. On 25th March, the NSE filed an affidavit in the HC 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 HC specifically asked NSE 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 the Exchange. 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."

Moneylife had reported (http://www.moneylife.in/article/8/4801.html) how the High Court dismissed the Exchange's appeal while passing strictures against the NSE. And how an exchange with loads of funds at its disposal, can try every method in the book to bully, harass and defame a diligent and senior officer. Since the Exchange is flush with funds, derived from profits of a well-preserved, near-monopoly commercial position, it can afford to fight a case right up to the Supreme Court. However, the question is whether this was necessary and whether it merely reflects its bullying antics, as has now been proved by the High Court and Supreme Court judgements.

The NSE has, over the years, created a perception of being a government entity but runs a virtual monopoly and operates an expensive private-sector set up. The Exchange's non-promoter executives, managing director Ravi Narain and deputy managing director Chitra Ramakrishna, earned 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. Now, with the Supreme Court dismissing its appeal, the NSE and its top brass, including managing director Ravi Narain, have no other option but to face a criminal case in a lower court.

The Sebastin Case

In October 2008, A Sebastin, a compliance officer in NSE, resigned from his job and joined MCX. 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.

 — Moneylife Digital Team