IPO scam: SAT reserves verdict on Sebi-NSDL case

The Securities and Appellate Tribunal (SAT) today reserved its verdict in the Rs 500 crore IPO scam wherein the National Securities Depository and its the then chief C B Bhave have challenged a Sebi probe that implicated them.

The scam occurred between 2003 and 2005 when multiple fictitious demat accounts were opened by a few individuals to corner IPO shares causing a loss of at least Rs 500 crore to retail investors.

Today's hearing was the first in the matter before the full SAT bench chaired by its newly-appointed presiding officer JP Devadhar and two full-time members-Jog Singh and A S Lamba.

Arguing the Sebi's case, its senior counsel Darius Khambatta said all through the years since the scam surfaced NSDL had been blaming the system for failure without ordering an independent inquiry to ascertain individual or systemic culpability and deficiencies.

NSDL's counsel Janak Dwarkadas, countering the Sebi argument, said the market regulator had no reason "to reopen the matter as my client has not been implicated either by the regulator, SAT or any court of law".

In 2008, a Sebi probe had faulted NSDL and Bhave but its board had rejected its findings after he became its chairman.

Dwarkadas also rejected Sebi charge that the NSDL did not order any inquiry into the scam and said ever since it surfaced the company has been improving its systems on a regular basis.

"There is no apex court ruling asking Sebi to reopen this case. The Sebi is citing the spirit of the law and not the law," Dwarakadas said.

Sebi counsel Khambatta contended that if NSDL had ordered any inquiry it was duty-bound to submit a copy of the findings to the regulator which had not been done till date.

Mumbai-based NSDL is the first central securities depository in India. Promoted by several Indian and foreign banks, it handles most of the securities held and settled in dematerialised form in the Indian capital market.