The National Stock Exchange (NSE) on Tuesday withdrew its Rs 100 crore defamation case against financial magazine Moneylife founded by Debashis Basu and Sucheta Dalal from the Bombay High Court. The NSE withdrew its petition from a division bench of the high court, which was hearing the exchange’s appeal against a single bench order of the court that had dismissed the case in September 2015.
The defamation case relates to a Moneylife report published in June 2015 that a few investors had fixed the high frequency trade (HFT) or algorithm based trading in the NSE and thereby jeopardised the interest of retail investors. The exchange on July 21, 2015, filed a defamation case against the magazine with a claim of Rs 100 crore.
The magazine had earlier published article on Algo trading based on a whistleblower’s letter to Sebi that it said was also copied to Dalal. The letter detailed how certain institutions registered for HFT were allegedly allowed to profit illegally by the exchange’s insiders. The exchange sought withdrawal of these reports.
On September 9, 2015, Justice Gautam Patel had dismissed NSE’s petition against Moneylife. Patel had also directed NSE to pay Rs 50 lakh in damages. According to the order, NSE had to pay Rs 1.5 lakh each as damages to Basu and Dalal and Rs 23.5 lakh each to Tata Memorial Hospital and Masina Hospital as donations.
The 30-page order of Patel had said that there is no case of defamation as NSE was given several opportunities to respond to an article on the bourse before it was published. Patel said that defamation law should “not to be used to gag, to silence, to suppress, to subjugate” the media and should be “narrowly construed” as it can restrict freedom of speech and expression. “Defamation is a very thin red line. It must not be crossed, but it is not actionable only because it is approached, however closely,” Patel had said.
Subsequently, the exchange had appealed the order passed by Patel before the division bench of the high court.
The withdrawal of the case comes at a time when the bourse is being probed by Sebi in the algo case. Sebi has issued show-cause notices to NSE and 14 key management personnel as part of its probe into alleged lapses in high-frequency trading offered via NSE’s co — location facility.
It is alleged that some brokers allegedly got preferential access through co-location facility at the NSE, early login and ‘dark fiber’ — which can allow a trader a split-second faster access to data feed of an exchange.