Sebi board clean chit to NSDL in IPO scam case

In a big boost to Securities and Exchange Board of India chairman CB Bhave, the Sebi board is understood to have given a clean chit to National Securities Depository Limited (NSDL) in the 2005 IPO scam case. The board viewed the proceedings afresh in the matter in its meeting. According to Sebi sources,the show-cause will be withdrawn and the final order will come out in the due course. Bhave who was heading NSDL at the time of the scam had recused himself from all the proceedings related to NSDL. Investigation by the regulator probe revealed that shares reserved for retail investors in several IPOs that hit the market between 2003 and 2005 were illegally acquired by various entities through tens of000 of fake demat accounts and fictitious applications. Thereafter,a two-member committee was constituted by the board. The committee comprising G Mohan Gopal,director of National Judicial Academy,and former RBI deputy governor V Leeladhar had passed an order against NSDL,directing it to carry out an independent enquiry to establish individual accountability for the failures of NSDL in the IPO scam. In August last year,the board considered the legal opinion and decided that the findings — including some comments on SEBI’s shortcomings — of the committee against the board were outside the confines of delegation and “without authority of law”. “These findings,which have vitiated these two orders,cannot be severed from the rest of the orders. Hence these orders are null and void and non-est,” a Sebi statement had said in December 2009. “It was also decided that the board as a whole (excluding Bhave) would dispose of these two matters afresh.” Gopal had objected to this action taken by Sebi. Justice J S Verma,former Chief Justice of India,also declared that such quasi-judicial orders can only be reviewed and quashed “by a judicial forum with requisite jurisdiction,at the instance of a petitioner with standing to seek relief.”