SC pulls up Sebi over IPO scam

Expressing concerns over the capital market regulator's outright rejection of a high-powered committee report probing IPO scam of 2006 and the role of NSDL in it, the Supreme Court on Monday asked Sebi to give its stand after two weeks.

The bench comprising Justice R V Raveendran and Justice A K Patnaik said that the report submitted by the Committee, which comprised senior Sebi officials, should have been considered by the regulator.

"Committee's report should have been taken into consideration. Instead of taking action, you sidelined the report," the bench said, adding, "this is a committee of Sebi members only and not of outsiders. Why did they say that it does not exist."

The apex court was also not convinced by submissions of the Attorney General Goolam E Vahanvati that the committee exceeded its limit.

The bench shot back: "We would like to see. Show us a single order given by the committee in NSDL matter where it exceeded its jurisdiction.

"Whatsoever they said against Sebi was self retrospection and this is not wrong. You could not have ignored," said the bench.

The Committee had also passed remarks against the manner in which Sebi had functioned in the IPO scam.

Over the submissions of Attorney General that CB Bhave was no longer chairman of the Securities and Exchange Board of India, the bench said, "even if Bhave is not there, whatever suggestion the committee has made, you Sebi should take a decision over it. Consider the suggestion and think about the market".

The apex court said that at this stage it would not issue notice to any one and would like to await the view of the Sebi on this.

After the IPO scam, Ministry of Finance had constituted a committee consisting of two Sebi members G Mohan Gopal, presently Director of National Judicial Academy, and V Leeladhar.

The committee passed three orders and found that NSDL had failed in its duty of supervising, investigating, monitoring data and directed it to conduct an independent inquiry to establish individual responsibility.

Moreover, the committee had given serious remarks over the manner in which Sebi was functioning and handled the entire episode.

It noted that Sebi had failed to carry out its regulatory role adequately and recommended the market regulator to make a Code of Conduct for depositories.

The report was placed before the Sebi on January 21, 2009, for action.

However, the capital market regulator decided to withhold orders of the Committee.

Later, Sebi said on November 11, 2009, that the findings of the committee were "outside the confines of delegation" and were without the authority of law.

It further said the orders were "null, void and non-est" and decided to look into the matter afresh.