Supreme Court notice to NSDL in 2005-06 IPO scam case

Sebi moves apex court against SAT order in the IPO scam case

The Securities and Exchange Board of India (Sebi) has moved the Supreme Court in the case related to the National Securities Depository Limited’s (NSDL) failure to prevent the 2005-06 initial public offering (IPO) scam.

The court has admitted the plea and has issued notices to the depository. The regulator has appealed against the Securities Appellate Tribunal’s (SAT) move in August this year, quashing a regulatory order against NSDL which had been passed by Sebi in December 2008. The Sebi order was implemented about two-and-a-half years later in July 2011 after initially being dismissed as ‘null and void’.

The orders required NSDL to conduct an independent inquiry to fix individual responsibility for failure at NSDL in the wake of IPO and demat scams between 2002 and 2006. NSDL board was also directed to conduct an independent audit of its systems and operations to identify the remedial measures. After hearing NSDL’s appeal against these orders, SAT had ruled that independent probes have already been carried out by depositories and remedial measures have been taken after ascertaining that there was no individual complicity.

“Therefore, at this belated stage directing the appellant (NSDL) to institute fresh inquiry to fix individual accountability... is wholly unjustified and unreasonable. Accordingly, we quash and set aside the impugned order dated December 4, 2008,” SAT said in its order. The tribunal added that this order “will not come in the way of the respondent to seek compliance of any other remedial measures that may be suggested by the respondent with a view to strengthen the depository system.”