SEBI NSDL Bhave in soup with multiple PILs Attorney General appears for SEBI
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SEBI NSDL Bhave in soup with multiple PILs Attorney General appears for SEBI

Bar & Bench

The Andhra Pradesh High Court is hearing two writ petitions on behalf of investors in the IPO scam which came to light in 2004-05, wherein several entities opened thousands of demat accounts to invest in IPOs to garner the share that was earmarked for retail investors. Attorney General Ghoolam Vahanvati is appearing for SEBI before the Bench comprising Chief Justice Anil Dave and Justice Nagarjuna Reddy. Vivek Reddy, Founding Partner of Vivek Reddy Law Chambers, is appearing on behalf of both the Petitioners.

[Clockwise, from the left, Vivek Reddy, V. Leeladhar, C.B. Bhave, Mohan Gopal and Ghoolam Vahanvati]

The Andhra Pradesh High Court is hearing two writ petitions on behalf of investors in the IPO scam which came to light in 2004-05, wherein several entities opened thousands of demat accounts to invest in IPOs to garner the share that was earmarked for retail investors.

A Committee comprising V. Leeladhar, former Deputy Governor, Reserve Bank of India and Dr. Mohan Gopal, Director, National Judicial Academy was constituted to adjudicate on the role of the National Securities Depository Limited (NSDL) and was also tasked with identifying the people who were responsible. The detailed order, which was passed in December 2008, found that NSDL, as a depository, had failed to detect and prevent the opening of fraudulent demat accounts. The final orders passed by the Committee have not been published for the last 11 months. Market sources indicate that the orders may have been suppressed because they implicate top officers of NSDL and SEBI.

The first writ petition, filed by V. Narayana Reddy, challenges the validity of SEBI’s decision to suppress the series of final orders passed on December 4, 2008 by the two-member committee on the role of NSDL.

The second writ petition, filed by Srinivas Podichety yesterday, has arraigned Dr. Mohan Gopal and V. Leeladhar as Respondents. The petitioner is seeking a declaration from the AP High Court that the action of not publishing the Final Orders is illegal and is demanding production of all documents from SEBI. Podichety is also seeking details of the investigation against Central Depository Services Limited (CDSL).

Attorney General (AG) Ghoolam Vahanvati is appearing for SEBI before the Bench comprising Chief Justice Anil Dave and Justice Nagarjuna Reddy. The AG undertook that SEBI would take a final decision on the publication of the orders within the next three weeks.

Sources say that the final order passed by the Committee might indict incumbent Chairman C.B. Bhave, who chaired the SEBI Board that suppressed the publication of the Committee’s orders. This is possibly the only instance where the head of an agency under investigation (NSDL), during the course of the investigation, became the head of the investigative agency (SEBI).

Vivek Reddy, Founding Partner of Vivek Reddy Law Chambers, is appearing on behalf of both the Petitioners. Speaking to Bar & Bench, he said, “It is absurd that SEBI wants to review a quasi judicial order passed by independent members of their board. There has to be a specific provision of law to do that. There is no provision for review in either the Depositories Act or the SEBI Act.”

Responding to a question on whether this is just another investor activist PIL, Vivek Reddy said, “The fact that the Attorney General has appeared in this matter means the issue is a serious one. Why would the AG appear otherwise? There are many firsts in this case, this is the first time SEBI is reviewing its own order and this is the first time there are open differences between independent and non independent directors of SEBI.”

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