NSE co-location case: 11 brokerages, 2 FPIs under I-T scanner

I-T officials suspect that these entities used tax havens to purchase assets, fund holidays and invest in some of the businesses of the families of these board members, said people with knowledge of the matter. Those being investigated include Infotech Financials Pvt Ltd (IFPL), which had obtained trading data from NSE for computing the Liquidity Index.

Sunita Thomas, wife of Suprabhat Lala, a senior NSE official, was one of the directors of Infotech Financials. Thomas was also sister-in-law of another NSE official Ajay Shah, a market economist who was instrumental in giving the contract to IFPL, which he later allegedly used for commercial benefit, according to the first report of the Securities and Exchange Board of India (Sebi) into the co-location matter. A recent Sebi report on the case has reignited interest in the 2010-14 matter and led to the questioning of several former NSE officials and the recent arrest of one of them. Ajay Shah and Suprabhat Lala didn’t respond to queries.

Tax officials are examining the foreign travel data of those named in the NSE co-location case for links to these brokerages and FPIs.

Serving NSE Officials on Radar

“There is a reason for the holidays via Seychelles,” said one of the persons cited above. “Investigation suggests that it was done to mask any link between the parties involved. We are also looking into investments in companies promoted by some of their family members.”

While Delhi-based brokerage OPG Securities is already being investigated by other government agencies, additionally 10 other brokerages and two FPIs are under the scanner. “It was not just one brokerage house. We are examining the extent of involvement of all the other brokerage houses who were named during initial investment by Sebi,” said one of the persons, citing a report by SK Mohanty, whole-time director, Sebi.

I-T department is also looking into transactions by three other serving NSE officials – -Ravi Varanasi, who was then head of the business development at NSE; Deviprasad Singh, head of co-location support; and Nagendra Kumar.

The office of Ravi Varanasi didn’t respond to queries. ET could not reach Nagendra Kumar and Deviprasad Singh.

All three were under Sebi’s lens, accused of colluding with two brokerages apart from OPG Securities to give them an unfair advantage over the rest of the market.