Crucial meeting of revamped SEBI board next week to reconsider NSDL case

Supreme Court had directed market regulator to take a second look at the inquiry report which was previously thrown out, in an obvious attempt to hide wrong-doings

The directors of the Securities & Exchange Board of India (SEBI) will meet on 26th of April to re-consider its exoneration of the National Securities Depository Limited (NSDL) on the direction of the Supreme Court of India. Although technically the SEBI board is meeting again, there will be many new faces around the board room table this time. The directors will once again consider the report of a two-member bench of the SEBI board, whose findings against NSDL were thrown out by a previous set of board members calling them "non-est" (or void).

For starters, the meeting will be headed by the new chairman UK Sinha. The previous meeting was chaired by TV Mohandas Pai, who is still on the SEBI board. Mr Pai stepped in since the then SEBI chief, CB Bhave, had recused himself from decision-making. Mr Bhave headed NSDL when SEBI initiated action against the depository in connection with the IPO scam.

Dr Mohan Gopal (chief of the National Judicial Academy) has been replaced by VK Jairath, former principal secretary of Maharashtra. Dr Gopal also remained absent from the previous meeting as he was one of the two members of the bench, whose findings were considered null and void (or non est), giving a clean chit to NSDL and CDSL.

Similarly, the Reserve Bank of India will be represented by Anand Sinha (instead of Usha Thorat) while the Ministry of Corporate Affairs will be represented by DK Mittal (in place of R Bandyopadhyay). Most importantly, Dr K P Krishnan, joint secretary, capital markets, who dominated all decisions related to the capital market and took the lead in burying the NSDL investigation that exonerated CB Bhave, has been replaced by his successor Dr Thomas Mathew.

The only constant are the three whole-time directors (WTDs) of SEBI, of whom two, MS Sahoo and KM Abraham, are set to complete their term in a few months. They were vociferously in the Bhave/NSDL camp.

In February 2010, the SEBI board focused on technicalities to exonerate NSDL of the charge of failing to detect the massive manipulation of initial public offering (IPO) allotments by a set of operators who packed the retail quota with multiple applications. The exoneration happened at the end of a long series of dubious decisions which ran as follows:
1.    Appointment of CB Bhave as SEBI chairman when there were SEBI investigations pending against the organisation he previously headed.
2.    The assumption, implicit in this decision that NSDL was not even guilty of minor transgressions or carelessness.
3.    Attempt to artificially "ring-fence" Mr Bhave from NSDL-related issues.
4.    Appointment of a two-member board committee (comprising Dr Mohan Gopal and former RBI deputy governor V Leeladhar) to decide NSDL-related issues.
5.    The mistake in assuming  that NSDL will get a clean chit from the bench.
6.    The attempt to bury the Gopal-Leeladhar report for several months.
7.    Making the report public only after a public interest litigation was filed in the Andhra Pradesh High Court.
8.    Exoneration of the rival Central Depository Services Limited (CDSL) through a one-line order, although charges against it were far more serious.
9.    And finally the controversial board meeting which exonerated NSDL and refused to consider a contrary legal opinion by no less than JS Verma, former chief justice of the Supreme Court of India.

Unfortunately for SEBI, a Delhi-based NGO called Manav Adhikar filed a special leave petition before the Supreme Court, which led to a direction by the apex court (on 28th March 2011) to reconsider its decision.

Interestingly, the humiliation heaped on Dr Mohan Gopal, a man with a formidable legal knowledge (apart from heading the National Judicial Academy, he taught law at the Harvard Law School) is probably unparalleled in so-called independent government bodies.

In fact, apart from re-examining its orders, the SEBI board ought to re-examine its completely inadequate regulatory authority over NSDL. As Moneylife has pointed out, the depositories are governed by a separate statute, which is administered by SEBI, but have grown far beyond their original mandate into areas where SEBI has no jurisdiction. Consequently, much of the business is dangerously outside any supervisory or scrutiny mechanism.

With such overwhelming evidence of such biased decision-making at the highest levels on this issue, and the Supreme Court deeming it fit to reopen the issue, it remains to be seen which way the new SEBI board, under a new chairman, will tilt. Will it go for the truth or for the status-quo?

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Ramesh Bhat

6 years ago

Great Job.

Appreciate SEBIs action in this. SEBI is working well under the new chairman.

Truth Always Wins.
- Ramesh Bhat


6 years ago

great job done by moneylife and sucheta. c.b.bhave must be very close to higher ups in power, especially to fm who often boasts of bringing zero load financial products era in the world through india!


6 years ago

Now only we come to know that sidelining his personal problems,he harshly taken decisions against thousands of mutual fund brokers and divert the public and others thought, though he has failed with IRDA.

sanjay shah

6 years ago

Mr Bhave during his tenure with SEBI has taken very harsh decision in many matters including cut in brokerage for mutual fund distributor, it is surprising when investigation is going against him how he his appointed as SEBI chief. He may be aware of the the scam, because such a big scam could not have have happened when a person of his calibre his heading a big exchange of india.

Vijay Trimbak Gokhale

6 years ago

It is necessary to refresh our memory to understand this in right perspective.PTI had reported on 28.3.2011 that SC has asked SEBI to clarify its stand on whether it was going to accept the report of a high-powered committee, which had probed IPO scam of 2006 and the role of NSDL in it. It further asked "Sebi to consider whether its board will reconsider the special committee's December 4 order in respect of NSDLand DSQ securities and to pass an appropriate resolution and place before this court". The Supreme Court also pulled up Attorney General Goolam Vahanvati appearing for Sebi for not giving any stand in this matter. It was also not satisfied with his reply that the board of Sebi has already taken a decision on the report of the committee, which had declared it as "non-est(does not exist)."

Earlier, on February 21, during the last hearing, the apex court had expressed its concerns over Sebi's outright rejection of the report and had asked the market regulator to give its stand within two weeks. It had further remarked that as Committee comprised senior Sebi officials, it should have been considered by the regulator. The apex court was also not convinced by submissions of Sebi that the committee exceeded its limit. The bench had 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 (committee) said (against Sebi) was self retrospection and this is not wrong. You could not have ignored," the bench had said.

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

It is Mr. Pai (an INFOSION when appointed as a public representative on the board of SEBI and soon to cease to be so) own to the country a lot of explanation as he presided over the meeting to carry out "Operation grand exoneration".

There are instances of some entities refusing to submit to RTI regime despite the fact the fact that it is a public authority under RTI Act 2005 is as clear as sunshine and allow the matter to languish in courts wasting shareholders’ money.

Some say this is no management excellence but abuse of the process of law. Unlike a normal petitioner who is interested in early hearing and disposal of case and requests court to do so, such petitioners choose to keep quiet. In any case truth comes out some day making them cut a sorry face. But they do not feel sorry about cutting sorry face. Pleasing their political bosses and securing plum government postings is their motto in life. Integrity and self respect is secondary to them. God only knows whether conscience pricks them. Their political bosses may get pleased but the credibility and image in the minds of citizens suffers a lot. People do not respect them. For them intelligence is a quality which enables them to know which side of the brad is buttered.

People speak grand things and give sermons about transparency when they either wear the mentle of a regulator or speak in 5 star tea biscuits seminar but are known to do quite the opposite.

Long live such champions of corporate governance and transparency.

But there is a ray of hope in judicial activism which will force them to act.

SBI withdraws teaser home loan scheme

Home loans from SBI will now attract an interest rate of 9.5% to 10.25% depending upon the loan amount. The withdrawal of the teaser rates comes within a month of the new chairman Pratip Chaudhuri taking charge at SBI

Mumbai: Amid concerns expressed by the Reserve Bank of India (RBI), the country's largest lender State Bank of India (SBI) today announced withdrawal of special home loan schemes, or teaser rates, with effect from 1st May, reports PTI.

SBI Easy Home Loan and SBI Advantage Home Loan (teaser rate products) will be replaced by floating interest rate schemes on par with other commercial banks.

Under the teaser home loan scheme, SBI was offering lower rate of interest of 8%-8.5% for the first three years.

It invited severe criticism from RBI, which had said the scheme could impact the asset quality of SBI's home loan portfolio.

The withdrawal of the teaser rates comes within a month of the new chairman Pratip Chaudhuri taking charge at SBI.

Home loans from SBI will now attract an interest rate of 9.5% to 10.25% depending upon the loan amount, SBI said.

The bank had also launched the SBI Advantage Car loan Scheme, under which credit would be provided at 10.75% for a maximum period of seven years.


Future Ventures says it does not have IPO documents of a listed company it acquired three years ago!

Company’s IPO prospectus says it cannot compare the promise and performance of Galaxy Entertainment because it does not have the IPO records of Galaxy which are legal documents. Still, SEBI has cleared the Future Ventures’ prospectus, unaware of the irony

Future Ventures India Limited, the Kishore Biyani-promoted investment company, recently announced an initial public offering (IPO) to raise Rs750 crore.

One of its group companies is Galaxy Entertainment Corporation, which was listed on the Bombay Stock Exchange, before Future Ventures acquired it three years ago. But the prospectus for the current IPO planned by Future Ventures says that it does not have any access to information about the promise and performance of this company.

Galaxy was promoted by Purnendu Chatterjee, once an associate of George Soros and a key promoter of Haldia Petrochemicals. Mr Chatterjee sold Galaxy to the Future group after the company's managing director expired. The Future Ventures' prospectus says, "We do not have access to the offer documents and other records of Galaxy. We are, therefore, unable to provide details on the promise made and the performance achieved by Galaxy."

This is strange. As Future Ventures acquired Galaxy and should have had all the records of an important corporate action such as an IPO in place. A prospectus is a legal document. The fact that a listed company has lost a legal document like the prospectus is quite extraordinary.

The prospectus could have been procured through book running lead managers too which helped the company to come out with its IPO. These lead managers are few in number and they should have been able to source the information.

Enam Securities, JM Financial, Kotak Investment Banking are the lead mangers for Future Ventures' IPO and the company could have taken their help to get access to the previous records of Galaxy, including the information for the prospectus.

The data could have come from a third party provider of information like Prime Database. Worst, all prospectuses are screened and examined before they are cleared by the market regulator Securities and Exchange Board of India (SEBI). The company could also have accessed the required information relating to Galaxy from SEBI too-assuming that SEBI has a record of all the issues that it clears! But we are not sure whether Future Ventures made any efforts to get hold of a prospectus.

What is ironical is that SEBI decided to give a 'go-ahead' for the Future Ventures prospectus, unaware of the irony that a prospectus it had cleared 11 years ago has simply vanished from the system! As against this, won't the regulated entities be put through hell if any compliance paper of theirs is found missing?




6 years ago

Without any clarity in the purpose of fund utilisation.Biyani is again collecting money without any shame after the IPO of Future Capital holdings which was a pick pocketing.This money will be redirected to his main company Pantaloon for working capital.Biyani dad a quality but not know

Anil Agashe

6 years ago

This is unbelievable! And the regulators are not doing what they should is appalling SEBI must have the prospectus in its own records as well. Is the prospectus read at SEBI? And what grading has the issue received?


6 years ago

There are no definitive plans to utilize the proceeds of the issue. It appears the issue is brought out to ease the liquidity faced by the group. The objects of the Issue have not been appraised by any bank or financial institution.One of the poor quality IPO, being managed by BRLMs with pathetic record. This is another day light robbery issue, like BS transcomm, Gyscoal alloys, CEBBCO, Aster silicates etc. SEBI should exercise caution while clearing these kinds of IPOS, whose only aim is to loot the public money. Servicing post issue equity around Rs 1400cr would be very difficult. FIRST CHOICE IPO.


6 years ago

Documents lost in the digital world ? cannot digest.

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