The Enforcement Directorate (ED) arrested former National Stock Exchange (NSE) chairman and managing director Ravi Narain on Tuesday, 6 September, under the Prevention of Money-Laundering Act (PMLA), 2002, for alleged illegal phone tapping of NSE employees.
This is the third high-profile arrest in connection with the illegal phone-tapping case. Narain's arrest comes on the back of an FIR filed by the Central Bureau of Investigation (CBI).
The CBI had also arrested former Mumbai Police Commissioner Sanjay Pandey and Chitra Ramkrishna, Ravi Narain’s successor as MD and CEO of the NSE, in July.
What's behind the spate of high-profile arrests? Who is Ravi Narain? And what's likely to happen next in this case? We explain.
Explained | Why Has the ED Arrested Ravi Narain & What Happens to Him Now?
1. Who Is Ravi Narain?
Ravi Narain graduated with a degree in economics from St Stephen’s College in Delhi and Cambridge University in the UK. He went on to complete his MBA from the Wharton School in the USA.
After his MBA, Narain returned to India to join the Industrial Development Bank of India (IDBI) which, at the time, was still a State-owned Development Finance Institution.
In 1994, Narain joined the National Stock Exchange as CEO and managing director. Narain's appointment came when the NSE was still in its nascent stage, having been recognised by SEBI only in 1993.
His efforts led to the NSE eventually overtaking the Bombay Stock Exchange (BSE) and breaking the BSE's monopoly over the Indian stock market.
Speaking on the condition of anonymity, a senior journalist with over 30 years of experience in the industry said:
"He's part of the start-up team of the NSE. The NSE is what it is today, because of him. He's done whatever was required to make the NSE what it is now. The NSE has a 90 percent market share now, because of his work."
Narain served as the chief of the NSE from April 1994 to March 2013 and remains the longest-standing chair and MD of the organisation.
Another senior journalist told The Quint that it was under Narain's tenure and guidance that the NSE started to gain an edge over the BSE by facilitating large volumes of derivatives trading.
Following his resignation as chairman in 2013, Ravi Narain was appointed as honorary vice chairman of the NSE. He also served in a board level/advisory capacity with respect to several NGOs, private corporate bodies, regulatory bodies, the RBI, and even the Government of India.
Expand2. Ravi Narain's Legal Troubles
In June 2017, the Securities Exchange Board of India (SEBI) issued a show-cause notice to Narain for his alleged involvement in the 'NSE colocation scandal.'
Here's a quick explainer on what colocation means. Colocation facilities are dedicated areas in the stock exchange building which are right next to the stock exchange's servers.
The proximity of the facilities to the servers allows for faster trade execution because of lower latency (which means faster connectivity). These facilities are usually used by institutional investors.
However, in the colocation scandal, it was alleged that one of the traders, OPG Securities, received better colocation facility access, allowing them to gain an edge over other traders.
In 2019, SEBI asked the NSE to pay Rs 625 crore with 12 percent interest as compensation. SEBI also barred the NSE from raising money from the stock market for a period of six months.
In February 2021, both Narain and his successor Chitra Ramkrishna were asked to pay a penalty of Rs 25 lakh each, coupled with 25 percent of their salaries drawn during the financial periods of 2011-2013. Ramkrishna reportedly denied the allegations and cited "technical glitches" for the colocation-related allegations, The Economic Times reported.
Expand3. Why Has the ED Arrested Ravi Narain?
The ED's current case is based on allegations of money laundering and illegal phone tapping of the employees of the NSE.
The ED had registered an Enforcement Case Information Report (ECIR) in July 2022 against former Mumbai Police Commissioner Sanjay Pandey and former NSE chief Chitra Ramkrishna for allegedly tapping the phones of employees between 2009 and 2017.
The ED has alleged that Rs 4.5 crore was paid to a private security firm called iSec Securities under the guise of "periodic study of cyber vulnerabilities" but, in reality, was for illegal phone taps against employees of the NSE.
Sanjay Pandey was accused of being the person running iSec Securities.
In July, the ED had also taken Chitra Ramkrishna and Sanjay Pandey into custody for questioning.
The arrest of Ravi Narain comes as part of a money-laundering investigation under the Prevention of Money-Laundering Act (PMLA), 2002, in relation to the phone-tapping case.
Expand4. What Next for Ravi Narain?
The ED filed a charge sheet naming Narain, Chitra Ramkrishna, and Sanjay Pandey at Delhi's Rouse Avenue Court on Friday, 9 September, ANI reported.
While the specifics of the charge sheet are yet to be made public, the case will come up for hearing on points of cognisance on 21 September. The lawyer for the ED is Naveen Kumar Matta.
"Once the ED arrests or calls someone for examination, they can ask the relevant questions and record the statements and use the statements in their investigation," said Tejasv Anand, a senior associate with Khaitan & Co.
He added that the ED has a fairly wide berth when it comes to questioning Narain or in the questioning of anyone accused of money laundering under the PMLA.
"Under Section 50 of the PMLA, the statements given by any accused person or a person being questioned, qualify as material evidence," Anand said.
Sources told The Quint that a case like this could take as long as 10 years to be resolved, and regardless of whether or not the ED can prove the case, it can certainly make a case to seek and extend custody of a suspect for months.
The leeway provided to the ED for questioning of people accused of money laundering also means the questioning can continue according to the ED's case-specific needs, they added.
Thus, while this is speculative, it's possible that Ravi Narain will continue to face questioning by the ED for some time before his release.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)
Expand
Who Is Ravi Narain?
Ravi Narain graduated with a degree in economics from St Stephen’s College in Delhi and Cambridge University in the UK. He went on to complete his MBA from the Wharton School in the USA.
After his MBA, Narain returned to India to join the Industrial Development Bank of India (IDBI) which, at the time, was still a State-owned Development Finance Institution.
In 1994, Narain joined the National Stock Exchange as CEO and managing director. Narain's appointment came when the NSE was still in its nascent stage, having been recognised by SEBI only in 1993.
His efforts led to the NSE eventually overtaking the Bombay Stock Exchange (BSE) and breaking the BSE's monopoly over the Indian stock market.
Speaking on the condition of anonymity, a senior journalist with over 30 years of experience in the industry said:
"He's part of the start-up team of the NSE. The NSE is what it is today, because of him. He's done whatever was required to make the NSE what it is now. The NSE has a 90 percent market share now, because of his work."
Narain served as the chief of the NSE from April 1994 to March 2013 and remains the longest-standing chair and MD of the organisation.
Another senior journalist told The Quint that it was under Narain's tenure and guidance that the NSE started to gain an edge over the BSE by facilitating large volumes of derivatives trading.
Following his resignation as chairman in 2013, Ravi Narain was appointed as honorary vice chairman of the NSE. He also served in a board level/advisory capacity with respect to several NGOs, private corporate bodies, regulatory bodies, the RBI, and even the Government of India.
Ravi Narain's Legal Troubles
In June 2017, the Securities Exchange Board of India (SEBI) issued a show-cause notice to Narain for his alleged involvement in the 'NSE colocation scandal.'
Here's a quick explainer on what colocation means. Colocation facilities are dedicated areas in the stock exchange building which are right next to the stock exchange's servers.
The proximity of the facilities to the servers allows for faster trade execution because of lower latency (which means faster connectivity). These facilities are usually used by institutional investors.
However, in the colocation scandal, it was alleged that one of the traders, OPG Securities, received better colocation facility access, allowing them to gain an edge over other traders.
In 2019, SEBI asked the NSE to pay Rs 625 crore with 12 percent interest as compensation. SEBI also barred the NSE from raising money from the stock market for a period of six months.
In February 2021, both Narain and his successor Chitra Ramkrishna were asked to pay a penalty of Rs 25 lakh each, coupled with 25 percent of their salaries drawn during the financial periods of 2011-2013. Ramkrishna reportedly denied the allegations and cited "technical glitches" for the colocation-related allegations, The Economic Times reported.
Why Has the ED Arrested Ravi Narain?
The ED's current case is based on allegations of money laundering and illegal phone tapping of the employees of the NSE.
The ED had registered an Enforcement Case Information Report (ECIR) in July 2022 against former Mumbai Police Commissioner Sanjay Pandey and former NSE chief Chitra Ramkrishna for allegedly tapping the phones of employees between 2009 and 2017.
The ED has alleged that Rs 4.5 crore was paid to a private security firm called iSec Securities under the guise of "periodic study of cyber vulnerabilities" but, in reality, was for illegal phone taps against employees of the NSE.
Sanjay Pandey was accused of being the person running iSec Securities.
In July, the ED had also taken Chitra Ramkrishna and Sanjay Pandey into custody for questioning.
The arrest of Ravi Narain comes as part of a money-laundering investigation under the Prevention of Money-Laundering Act (PMLA), 2002, in relation to the phone-tapping case.
What Next for Ravi Narain?
The ED filed a charge sheet naming Narain, Chitra Ramkrishna, and Sanjay Pandey at Delhi's Rouse Avenue Court on Friday, 9 September, ANI reported.
While the specifics of the charge sheet are yet to be made public, the case will come up for hearing on points of cognisance on 21 September. The lawyer for the ED is Naveen Kumar Matta.
"Once the ED arrests or calls someone for examination, they can ask the relevant questions and record the statements and use the statements in their investigation," said Tejasv Anand, a senior associate with Khaitan & Co.
He added that the ED has a fairly wide berth when it comes to questioning Narain or in the questioning of anyone accused of money laundering under the PMLA.
"Under Section 50 of the PMLA, the statements given by any accused person or a person being questioned, qualify as material evidence," Anand said.
Sources told The Quint that a case like this could take as long as 10 years to be resolved, and regardless of whether or not the ED can prove the case, it can certainly make a case to seek and extend custody of a suspect for months.
The leeway provided to the ED for questioning of people accused of money laundering also means the questioning can continue according to the ED's case-specific needs, they added.
Thus, while this is speculative, it's possible that Ravi Narain will continue to face questioning by the ED for some time before his release.
(At The Quint, we question everything. Play an active role in shaping our journalism by becoming a member today.)