Ajay Shah, a former consultant with the ministry of finance (MoF) between 2004 and 2009 and a key accused in the National Stock Exchange (NSE) colocation (colo) scam, is under investigation for holding sensitive documents falling under the Official Secrets Act (OSA), says
a report from BusinessLine.
The newspaper says, "An internal appraisal report of the Income Tax (I-T) department says that Mr Shah was into the business of lobbying and secret government policy decision papers in his possession could have been used for dabbling in stocks. It is important to mention that several secret and privileged documents, including cabinet notes, were also found from the digital data seized from Prof Shah. He may have been aware of important government policy decisions in advance, which could have had a bearing on stock prices as well."
"The documents include emails regarding lobbying for the NSE, including favourable policy changes, some privilege communication between DGIT (Inv) Mumbai and Member Investigation CBDT. Further, possession of confidential documents related to search and seizure actions by the I-T department is a violation of OSA 1923," the newspaper says, quoting from the I-T department's report.
The I-T report further says that it has found further emails that show how senior officials of NSE, such as Suprabhat Lala, who is also the brother-in-law of Mr Shah, Mr Shah's wife Susan Thomas and an associate Krishna Dagli and their companies were 'involved in commercial software development and discussing latency-based arbitrage for commercial purpose'.
In fact, Mr Shah and his wife Susan were the only two academicians with deep access to NSE. They first received trading data from NSE in their personal capacity and, later, as academics associated with the Indira Gandhi Institute of Development Research (IGIDR). Further, Sunitha Thomas, whose firm Infotech Financials Pvt Ltd, which writes algorithms and had access to this data, is married to Mr Lala, a key official of NSE.
Quoting the I-T department report, BusinessLine says, Mr Shah and his associates started getting tick-by-tick (TBT) data from the NSE since 2006, four years before Colo trading was launched. The report mentions an email exchange in 2006 between Mr Dagli and Mr Shah, when he was still a consultant to the MoF, where both of them are discussing how to use the TBT data.
In an order issued in February 2021, Amit Pradhan, adjudicating officer (AO) of SEBI, mentioned that NSE, as a stock exchange, failed to ensure a level playing field for trading members subscribing to its TBT data feed system.
