No matter how hard Securities Exchange Board of India (SEBI) chairman C B Bhave tries to dust the ashes of the 2005 IPO scam under the carpet, it comes right back to haunt him. An aggrieved investor, V Narayan Reddy, has filed a writ petition in the Andhra Pradesh High Court, questioning the market regulator’s action of withholding a final order passed by its two-member committee with respect to the role of National Securities Depository Ltd (NSDL) in the IPO scam. He alleges that SEBI is not inclined to publish the order to prevent adverse consequences for Mr Bhave, as he was the chairman and managing director of NSDL when the scam occurred.
 
The final order was passed on 4 December 2008 by a two-member committee comprising independent directors of SEBI Board, Dr Mohan Gopal and V Leeladhar. The committee was specifically tasked with disposing the ongoing quasi-judicial proceedings against NSDL. The PIL came up before a bench comprising Chief Justice Anil Dave and C V Nagarjuna Reddy. The court has issued a notice to the regulator and posted the matter for hearing on 13 October 2009.
 
The petitioner also submitted that in addition to the failure of NSDL, there was also a failure of SEBI to protect the interest of the investors and regulate the depository system. He claims that SEBI has ulterior motives in not publishing the final order. It is his belief that apart from indicting NSDL, the order also indicts SEBI for its failure to regulate depositories and that it has also given directions to SEBI to conduct an investigation of individuals at NSDL who were responsible for this scam. He opines that SEBI’s reluctance to release the order also stems from its efforts to protect then NSDL chairman CB Bhave. To avoid conflict of interest, Mr Bhave has since recused himself from the ongoing proceedings with regard to role of NSDL in the IPO scam.

Instead of complying with the order, the SEBI Board by a resolution dated 13 April2009, decided to withhold publication of the order on the ground that it was examining whether SEBI has the power to review the said order. Even after ten months of passing of the final order, SEBI is yet to release the order or take any steps to comply with the directions given in the said order.
 
Subsequent to the scam coming to light in 2005, SEBI had conducted an investigation into the role of NSDL in the said scam. Pursuant to the investigation, SEBI issued an interim order that found several failures on the part of NSDL to detect and prevent the scam. It was found that numerous benami accounts had been opened with NSDL and CSDL between 2003 and 2005, with the aim of cornering shares reserved for retail investors. Both these depositories were aware that dummy accounts were being opened, but failed to prevent the scam. In view of these grave lapses, the interim order had directed a revamping of NSDL management. NSDL, however, challenged the validity of this order before the Special Appellate Tribunal (SAT), but did not press the appeal because of a statement from SEBI’s counsel that the observations made in the interim order are “prima facie observations” and are subject to a final order passed by SEBI. The two-member committee of SEBI, after hearing the arguments of NSDL and SEBI, passed a series of final orders on 4.12.2008 with respect to the role of NSDL in the IPO scam.
 
The petitioner has requested the bench to consider the action of SEBI in not publishing the final order as arbitrary, illegal, unconstitutional and ultra-vires of the provisions of the SEBI Act and Depositories Act. He has also requested the court to direct SEBI to publish the suppressed committee report and take appropriate action as per the direction given by the two-member committee to prevent the fraud and abuse of the depository system.