NSDL gets a clean slate in IPO scam, courtesy SAT & SEBI

Earlier, the market regulator exonerated NSDL and now SAT wants to erase certain adverse remarks against the depository made by the two-member bench of SEBI

The National Securities Depository Ltd (NSDL) now has a squeaky-clean slate following orders from the Securities Appellate Tribunal (SAT) and market regulator Securities and Exchange Board of India (SEBI) in the initial public offer (IPO) scam. SAT, in its latest order, has asked SEBI to erase certain adverse remarks against NSDL made by the two-member bench appointed by the regulator in relation with the IPO scam of 2003-2005.

Earlier, in February, SEBI exonerated NSDL for the depository's alleged failure in preventing the IPO scam. SAT, in its latest order, said that it is satisfied in the light of the directions issued by SEBI. "NSDL has revised its business rules and put in place additional procedures to deal with the accounts of the beneficial owners in the event of deactivation/termination of a depository participant," the order said.

The two-member SEBI bench comprising G Mohan Gopal, director, National Judicial Academy and former Reserve Bank of India (RBI) deputy governor V Leeladhar, had passed a strongly-worded order against NSDL, directing it to carry out an independent enquiry to establish individual accountability for the failures of NSDL in the IPO scam.

The IPO scam goes back to 2006 when SEBI investigations conducted by then chairman M Damodaran, unearthed that shares reserved for retail investors were illegally acquired by various entities through tens of thousands of fake dematerialised (demat) accounts and fictitious applications. From the facts, it appeared that NSDL was liable for poor oversight that allowed fake demat accounts to be opened. NSDL's then head CB Bhave denied any responsibility for the scam even though the banks that had opened the fake demat accounts were penalised by the RBI.

Based on the prima facie findings, SEBI issued various directions against 82 financiers, 24 key operators, 12 depository participants (DPs) and two depositories. The order also asked NSDL promoters to take all appropriate actions including revamping of management, which clearly has allowed matters to come to such a sorry pass, without further loss of time. 

After Mr Bhave took over as SEBI chairman, a two-member bench was constituted to look into the IPO scam as well as the DSQ Software Ltd case.

This was followed by a one-year effort to bury the orders of the two-member bench. Finally, under pressure from a public interest litigation (PIL) filed in the Andhra Pradesh High Court, the SEBI board met and was forced to release the three orders of the bench into the public domain. But the board sought to kill the application of the orders by declaring that two of the orders as void or 'non est' since the bench had gone beyond its brief in criticising the regulator itself.

Dr Gopal had objected to this action taken by SEBI. His reservations were echoed by Justice JS Verma, former Chief Justice of India, who 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." Justice Verma is one of the most respected jurists whose opinions are not for sale.

Citing the SAT orders, the SEBI board had said, "In substance, the Hon'ble SAT has held that NSDL cannot be faulted for any lapses or deficiencies on those counts. In view of this finding by Hon'ble SAT in its order and submission made by NSDL as in paragraph 11 above, we do not find it necessary to examine the very same aspects any further and issue any fresh directions."

Earlier, the SEBI board had also sought the legal opinion of C Achuthan, former presiding officer of the Securities and Appellate Tribunal (SAT), in relation to this matter. Dr Gopal had officially pointed out that Mr Achuthan's position was conflicted because he had represented one of the IPO accused (Karvy) in a matter before the Andhra Pradesh High Court. Mr Achuthan is also a director on the NSE board, a SEBI-regulated entity. NSE is the promoter and major shareholder of NSDL.



Suresh Gupta

6 years ago

I find it to be a very strange case but typical of Govt. (Sarkari). In which the culprit is himself a judge so how you can expect any thing from such a situation. It shows all the rules and punishments are only for small aadmi and these big people will always go scot free will again come and ride on your back making a mockery of the whole system.


Nandan Maluste

6 years ago

I have not been following this matter. But would value confirmation of the steps Mr. Bhave took to ensure that he was not seen as judge and jury in his own case.


Debashis Basu

In Reply to Nandan Maluste 6 years ago

Hi Nandan,
Good to see you here. In case you want to read more on the NSDL issue, please click:


Information Commission goes digital to improve efficiency

Shailesh Gandhi, the CIC, estimates that with the digitisation, his office would be saving about 20,000 sheets of paper in the next twelve months

Shailesh Gandhi, the Central Information Commissioner, has changed the image of a typical government office, at least at the Information Commission. Over the past three months, his office has scanned all of its 9,000 files which are now available on the office network for any member of the staff to access.

About two weeks back, Mr Gandhi's office stopped receiving paper and started accepting digital images every day. All new communications come to his office after scanning and converting of papers into a soft or digital copy. Even for emails, the Commission now attaches the email to the appropriate electronic folder instead of printing and keeping a hard copy in the file.

"While I admit that my office is relatively 'young' and most records are less than two years old, I believe that more government offices can move towards making their records electronic," Mr Gandhi said in his blog.

The preamble of the Information Technology Act states that it is an Act to facilitate electronic filing of documents with government agencies. Section 4 of the Act provides legal recognition to electronic records; Section 5 provides legal recognition to digital signatures; and Section 7 states that if a record is to be retained for a particular period of time it would be deemed to have satisfied that rule if it is available in an electronic format. In short, digital record-keeping is definitely the way forward in any office-government or otherwise, says Mr Gandhi.

The Commission created a very simple computer program, which is easily duplicable, to manage the work in the office. The program not only makes all files available to every member of the staff at all times, but it also means that any new action taken on the files gets linked to the original file with the click of a mouse. Only letters, which have to be sent by the office, are printed. Drafts of orders, notices, and other types of communications are reviewed on the computer before printing. Mr Gandhi estimates that his office would be saving about 20,000 sheets of paper in the next twelve months.

He said that his office was able to make the transformation in a very short span of time and with no requirement for any additional budget. "Simple changes can make a big difference-all we need to do to make those simple changes is to set our mind to it. If all government offices go digital, the impact on governance and transparency could be huge. As by-products we could get a reduction of corruption and paper usage," the information commissioner added.



T.P. Viswanathan

6 years ago

Will the CIC be pleased to provide the email id of his office in his office website or in the Central Government Website!

kishore jagtiani

6 years ago

A commendable effort & work done by Shailesh Gandhi.

It saves paper, time & is easily available to everyone at a moments notice, improving efficiancy & removing corruption & corrupt practices & manipulation.

BoR board likely to meet on Thursday to discuss voting validity

The meeting was called after a majority of the directors on the bank's 15-member board sought to clear the uncertainties pertaining to the EGM held on Monday, which witnessed dramatic events following court interventions

Amid the continuing uncertainty on the validity of the poll conducted by Bank of Rajasthan (BoR) shareholders on Monday, the bank's Board is likely to meet on Thursday (24th June) to discuss the legal opinion it has obtained on the matter, reports PTI.

According to a source close to the development, the meeting was called after majority of the directors on the bank's 15-member board demanded it to clear the uncertainties pertaining to the Extra-ordinary General Meeting (EGM), which witnessed dramatic events following court interventions.

"The board of BoR will meet tomorrow to discuss the legal opinion it received on the validity of the voting process conducted at the EGM. The meeting has been called for after a majority of the independent directors of the bank demanded it," the source told PTI.

On Monday, high drama marked the shareholders' vote on Bank of Rajasthan's merger with country's largest private sector bank, ICICI Bank, with a local court in Kolkata staying the extraordinary general meeting (EGM) only for it to be vacated by the high court.

The meeting to approve the merger of Udaipur-based BoR with the country's largest private sector lender ICICI Bank got off to a chaotic start, when the BoR management said it was cancelling the meet following a stay obtained by an investor from a civil court. Following this, the shareholders elected a chairman from among them and went ahead with the voting.

On Tuesday, BoR's RBI-appointed managing director and CEO, G Padmanabhan had said that the bank has sought legal opinion to examine whether the votes cast by the shareholders were legally binding.

BoR is understood to have received the version from legal experts on the validity of shareholders' poll but the details are not yet known.

Both BoR and ICICI Bank shareholders had voted in favour of the merger of the two entities at a swap ratio of 1:4.72.

BoR has nine independent directors on its Board-P N Bhandari, K N Bhandari, M R Calla, Pran Agarwal, K G Kurian, Vipul Mehta, Dharinder Tayal, Salil Kapoor, Nitin Goel. It has five RBI nominees also on the board including Padmanabhan.

ICICI Bank last month agreed to take over Bank of Rajasthan in a share-swap deal that valued the Udaipur-based bank at over Rs3,000 crore. The share swap ratio was fixed at one ICICI Bank share for every 4.72 shares of BoR. Both banks can proceed with the merger only if the shareholders approve the swap ratio.

Once the shareholders approve the merger, both banks will then approach the Reserve Bank of India (RBI).


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