Special Court Accepts CBI Closure Report in NSE Co-Location Case

The CBI closure report has been accepted by the special court in a case of NSE (National Stock Exchange) co-location 'scam'. This case involved a company founded by former Mumbai Police Commissioner Sanjay Pandey, which had audited two stockbrokers.

In the 'co-location facility' of NSE, certain brokers were permitted to place their servers within NSE's data center directly. This enabled them to access details about share prices earlier than regular investors and other brokers. It was claimed that this building was abused, and certain brokers achieved unequal benefit. Sanjay Pandey's firm, I-Sec Services, had audited two large brokers, SMC Global and Shastra Securities, between the years 2013 and 2015. It was claimed that this audit was merely paperwork and was carried out in order to conceal the actual deficiencies.

The CBI admitted in its final report that SEBI (Securities and Exchange Board of India) rules were violated. But the agency did not find any concrete evidence to prove that the audit was done with the intention of deliberate fraud. Also, it could not be proved that due to these audit flaws, any irregularities like circular trading or 'pump and dump' scam took place in the stock market. The investigation also revealed that at that time, SEBI did not have such strict provisions through which phone calls or other records could be kept safe for a long time.

Sanjay Pandey formed this company in 2001 and resigned from the post of director in 2006. After this, the management of the company went into the hands of his family. The CBI had registered an FIR in this case on behalf of the ED (Enforcement Directorate). In 2023, the CBI had filed a closure report, but the court had asked for further investigation. Now, after additional investigation, the court accepted the report.

In this case, the CBI said that although some rules were not followed, it does not fall in the category of fraud or forgery. Along with this, the agency has sent recommendations to the SEBI Chairman that strict steps should be taken to prevent such lapses in the future. The court approved the closure report as there was no concrete evidence of criminal conspiracy in this case, but at the same time, it also gave the message that the responsibility of market regulators should not be merely formal but practical and strict.