NSDL’s IPO scam case won’t go away

NSDL’s IPO case is a reminder that former SEBI chairman appointment was made under the most bizarre circumstances

The Securities and Exchange Board of India (SEBI) has challenged an order of the Securities Appellate Tribunal (SAT) letting off the National Securities Depository Limited (NSDL) for its role in the multiple-application scam of 2003-05 and more serious lapses in DSQ Software’s dubious increase in capital just after the dotcom bubble. This has happened soon after the third public interest litigation (PIL) questioning chairman UK Sinha’s appointment was thrown out by the Supreme Court (SC). On 19th November, India’s apex court has asked NSDL to file a response to SEBI’s challenge, giving a fresh life to the most bizarre, but hardly-reported, case in the 25-year life of India’s market watchdog.

CB Bhave shepherded the depository statute through Parliament as executive director at SEBI and went on to found NSDL and head it for the largest number of years in its existence. The depository grew rapidly and extended its operations into tax information and other areas, far beyond SEBI’s ambit.

NSDL’s aura of high efficiency was shattered after an income-tax investigation stumbled on a massive multiple-application scam which had gone unnoticed by the depository, even though the applicants brazenly consolidated thousands of allotments into a few depository accounts before the shares of a manipulated initial public offering (IPO) were listed.

It seemed astonishing that NSDL’s systems were unable to detect multiple applications. But what was scandalous is the saga after that. Under chairman M Damodaran, SEBI ordered an inquiry that indicted NSDL. The depository managed to raise a storm of outrage.

Soon after, Mr Bhave was appointed SEBI chairman, despite pending investigation and regulatory action. An artificial ring-fence was created around Mr Bhave to allow a fair investigation of the IPO scam to continue, but the signal from the finance ministry was clearly that NSDL was wrongly indicted.

In a strange twist, a two-member committee of the SEBI board again indicted NSDL and also discovered the DSQ episode. The report of 2008 lay buried for a year and was made public only when Dr Mohan Gopal, a member of the committee, went public after a PIL was filed in an Andhra Pradesh court.

Did this lead to action against NSDL? No. In fact, the SEBI board, in a bizarre decision, declared the orders of its own committee as void in February 2010! In the process, the board also ignored a legal opinion from none other than the late Justice JS Varma, an extremely respected former chief justice of the Supreme Court.

Finally, SEBI was asked to reconsider its order by the Supreme Court in July 2011. NSDL was then ordered to conduct an inquiry and fix responsibility for the lapses and it challenged the SEBI order before the SAT.

Meanwhile, the case dragged on; Mr Bhave’s term was not extended; this led to several PILs being filed against UK Sinha’s appointment which the apex court has recently called ‘motivated’. NSDL was also bifurcated, to set right issues with its regulation and supervision that Moneylife had pointed out.

Interestingly, in August 2013, SAT decided to quash SEBI’s order of 2008 (implemented only in 2011) saying that fixing individual responsibility at this belated stage was ‘unjustified and unreasonable’. SEBI has challenged the SAT dismissal, ensuring that the highest court in the country hears this sordid saga involving repeated perversion of power, motivated appointments to the SEBI chairman’s post and evasion of responsibility for the IPO scam.

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    Parimal Shah

    6 years ago

    It happens only in India.

    mm sundram

    6 years ago

    NSDL, the first and largest depository in India, established in August 1996 and promoted by institutions of national stature that handles most of the securities held and settled in dematerialised form in the Indian capital market.NSDL is promoted by Industrial Development Bank of India (IDBI) - the largest development bank of India, Unit Trust of India (UTI) - the largest mutual fund in India and National Stock Exchange (NSE) - the largest stock exchange in India. Some of the prominent banks in the country have also taken a stake in NSDL. the current value of securities held in the depository is worth about US$1,334 billion. But this depository have accepted a fraudulently opened account without valid AGREEMENT Which is against the Depository Act and SEBI's guidelines. i can prove that this, largest depository having trillion worth of Rupees securities held in demat form, allowed the illegal operations along with delhi based brokerages and i have already got the Madras high Court's directions and filed FIR. but the SEBI, could not make any kind of action over this depository eventhough lot of NSDL's wrong doings brought black and white before the sebi officials. Tax payer's monies completely wasted and still i could not get back my assets of securities.


    6 years ago

    operational head india
    singapore media and channel group

    with regard to duty of NSDL neither the officials of NSDL nor the stock exchanges knew there is separate racket going and this is looting the indian investors trust and confidence when any investors raise or lodges any complaint that they are controllor for all DP in India they sherk the responisbility and they say that it had to be asked with concerned stock exchanges and when they control over all broking houses and all the exchanges as an journalist when we question to Shri prashant Prachada he would sherk the saying to it doesnot comes under the control as such the VP of NSDL itself is not sure of his duties and responsibility that is the state of affairs of NSDL india and they are paid heavily and this institution is wasteful expnediture without accoutnability it could be wounded up and concerned stock exchanges can have the control instead of separate institution is my opioion if need we would prove with valid proof which was issued by NSDL when questioned

    Vaibhav Dhoka

    6 years ago

    Let us hope ills of Mr Bhave open before nation.The hope for common man in India is extremely bleak.In present scenario of Loot Lo,one cannot desist oneself if he gets power,KURSI is one every one wants to grab.

    CBI court finds Rajesh, Nupur Talwar guilty for Aarushi's murder

    The CBI court held both Rajesh and Nupur Talwar guilty for murdering their teen daughter Aarushi and their domestic help Hemraj at their home in May 2008

    A Central Bureau of Investigation (CBI) court on Monday convicted dentist couple Rajesh and Nupur Talwar in the Aarushi-Hemraj double murder case.


    According to lawyers, the dentist parents have been convicted of murder and destruction of evidence among other offences.


    "We are deeply disappointed, hurt and anguished for being convicted for a crime that we have not committed. We refuse to fee defeated and will continue to fight for justice," the Talwar couple said in a statement issued after the verdict.


    Nupur and Rajesh Talwar were found guilty of murdering their teen daughter Aarushi and their domestic help Hemraj at their home in May 2008.


    Rajesh Talwar has also been convicted for filing a wrong first information report (FIR) with Noida police.

  • User

    Tarun Tejpal moves HC for anticipatory bail in sexual assault case

    Tarun Tejpal, in his petition, has also sought transit bail to approach the appropriate court in Goa

    Tarun Tejpal, the editor of Tehelka on Monday moved the Delhi High Court seeking anticipatory bail in a sexual assault case lodged against him in Goa.


    Justice GS Sistani, before whom the petition was mentioned by senior advocates KTS Tulsi and Geeta Luthra, will hear the matter on Tuesday.


    Tejpal, in his petition, filed through advocate Sandeep Kapur, has also sought transit bail to approach the appropriate court in Goa.


    The alleged incident happened in a lift in a five-star hotel in Goa earlier this month.


    The Goa police had on November 22 lodged an FIR against Tejpal under sections 376 (rape), 376 (2)(k) (rape by a person of a woman in his custody taking advantage of his official position) and 354 (outraging modesty) of IPC in connection with the incident.


    Conviction under section 376 of IPC entails a maximum of life term in jail.


    The issue came into the limelight when an email by the woman journalist of his magazine alleging sexual assault was made public and Tejpal announced on 19th November that he was 'recusing' from his job for six months.


    Yesterday, a three-member Goa police team, which had arrived in Delhi on 23rd November, quizzed Tehelka managing editor Shoma Chaudhury and three employees who had been contacted by the alleged victim to corroborate her version.


    The police also seized from the Tehelka office a hard disc, transcripts of emails exchanged among Tejpal, Choudhury and the girl and other documents.

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