The 2008 orders of the special two-member SEBI committee which criticised the role of National Securities Depositories Ltd (NSDL) in the IPO scam of 2003-2005 have been put up afresh on the Web site of SEBI.
NSDL is to comply with these orders, according to a decision made on Thursday by the Board of SEBI.
Some legal and regulatory experts expressed surprise that these orders, which were declared null and void by the SEBI Board in November 2009, are now reinstated — again by the SEBI board — without observing, in their opinion, “due legal process”. (Although the orders were declared null and void, they were put up on the SEBI Web site in the interests of transparency).
The orders had found fault with NSDL's role in the IPO scam and had asked the depository to conduct an enquiry to fix personal liability, if any. The independent two-member committee was created to deal with SEBI-NSDL cases, since Mr C.B. Bhave who was Chairman of SEBI, had been heading NSDL at the time of the scam.
After the SEBI board declared the two-member committee's orders null and void, it sat afresh on the case and exonerated NSDL from any role in the scam.
‘2 orders can't co-exist'
“To restore the two-member committee's orders, the board order which declared these orders null and void should be declared null and void,” said a regulatory expert. “How can both the two-member committee's orders and the SEBI board's order annulling them co-exist?”
Regulatory expert and founder-head of legal firm FINSEC Law Advisors, Mr Sandeep Parekh, however, does not find anything conflicting about this. “The two-member committee's orders were legal. The SEBI board's order annulling them was illegal and the board had no authority to do so. SEBI has simply set aside the illegality now.”
NGO's plea
An NGO, ‘Social Action Forum for Manav Adhikari', had last year filed a case in the Delhi High Court against the manner in which SEBI disposed of its special committee's report, and asked, among other matters, that the SEBI board decision declaring the two-member committee's report as void be quashed.
The High Court dismissed the Writ Petition and imposed a cost of Rs 50,000 on the petitioner. The petitioner then moved the Supreme Court, which has asked SEBI to explain itself. This is what has prompted the SEBI's action on the matter at its last board meeting.
Apex Court's advise
“The Supreme Court had asked SEBI to reconsider its decision. And there is no reason why an illegal order has to be explicitly set aside. That the SEBI board order is saying that its own order is not valid has been done subtly,” added Mr. Parekh.
“Legal processes are not one of subtle inferences but are manifest expressions; some authority must declare one of the orders to be null and void,” said the above-mentioned regulatory expert.
He said that in all this, NSDL will probably benefit in that it will have some arguments to defend itself with.