Appeal allowed against NCL decision, SEBI to address complaints promptly

The Tribunal held that an appeal is maintainable under Section 23L of the SCRA Act against a decision of the NCL, as NCL is a recognized clearing corporation. SEBI was directed to consider complaints and provide a hearing to interested parties, ensuring compliance with principles of natural justice. The affected parties sought annulment of trades and return of securities, with SEBI instructed to hear and decide the matter promptly. The Nifty Option Contract was ordered to remain in abeyance until a specified date by an interim direction from the Supreme Court of India.

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Issues Involved:
1. Annulment of trade due to alleged fraud by Allied Financial Services Private Limited.
2. Jurisdiction and maintainability of the appeal under Section 23L of the SCRA Act.
3. SEBI's role and compliance with principles of natural justice.
4. Specific claims for return of securities and annulment of trades by affected parties.

Detailed Analysis:

1. Annulment of Trade Due to Alleged Fraud:
- The core issue revolves around the annulment of a trade involving NIFTY options contracts, which Allied Financial Services Private Limited (Allied) sold based on mutual fund units placed as collateral. ISSL, acting as a clearing member, sought annulment of these trades, alleging fraud by Allied.
- Allied received an upfront premium of around Rs. 380 crore from ISSL for these trades. ISSL contended that the trades were based on fraudulently transferred collaterals and were not in the interest of the securities market, thus seeking annulment.
- SEBI initially rejected ISSL's contention and directed that the appropriate authority for annulment was the Stock Exchange as per SEBI's circular.
- The Clearing Corporation (NCL) later rejected ISSL's application for annulment, stating that appropriate orders could only be passed after investigations by SEBI and the Economic Offence Wing (EOW) were completed.

2. Jurisdiction and Maintainability of the Appeal:
- SEBI raised an objection regarding the maintainability of the appeal under Section 23L of the SCRA Act, arguing that no appeal lies against an order passed by NCL.
- The Tribunal held that an appeal is indeed maintainable under Section 23L against a decision of the NCL, as NCL is a recognized clearing corporation under Section 4 read with Section 8-A of the SCRA Act. The functions and duties of a recognized stock exchange transferred to a clearing corporation would also be appealable under Section 23L.

3. SEBI's Role and Compliance with Principles of Natural Justice:
- SEBI's interim order and subsequent confirmatory order against Allied were challenged by various parties, including Keshav Prasad Misra and others, Navjoy Emporium Private Limited, and Dalmia Cement (Bharat) Limited, who alleged that their securities were illegally transferred by Allied.
- The Tribunal found that SEBI violated the principles of natural justice by not providing an opportunity of hearing to Navjoy and Dalmia before modifying the confirmatory order. SEBI was directed to consider the complaints and provide a hearing to all interested parties.

4. Specific Claims for Return of Securities and Annulment of Trades:
- Affected parties, including Keshav Prasad Misra, Navjoy Emporium, and Dalmia Cement, sought annulment of trades and return of their securities, which they claimed were illegally transferred by Allied.
- The Tribunal noted that these issues had not been addressed by any authority and directed SEBI to consider the specific claims and applications of the appellants, providing an opportunity for a hearing and passing a reasoned order.

Conclusion:
- The Tribunal directed all appellants to file appropriate applications before SEBI by 8th July 2019, and SEBI was instructed to hear and decide the matter by 17th July 2019, ensuring compliance with principles of natural justice.
- The Nifty Option Contract on the F&O Segment of NSE, which was to expire on 27th June 2019, was ordered to remain in abeyance till 22nd July 2019, following an interim direction by the Supreme Court of India.

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