Capital market regulator Sebi on Monday informed the Supreme Court that its board has decided to reconsider an earlier decision to give clean chit to depository NSDL in the IPO scam.

Attorney General GE Vahanvati told the bench headed by Justice RV Raveendran that the board had decided in its meeting held on April 26 to revisit a special committee?s report that found National Securities Depository (NSDL) at fault for the alleged irregularities related to the IPO scam during 2003-06.

The board under the chairmanship of C B Bhave had in February 2010 set aside the special committee report and had cleared NSDL with mismanagement charges on the 2006 IPO scam in which large investors using fake demat accounts illegally acquired scrips of companies and sold them at high prices on listing.

This had raised questions concerning Bhave?s role. However, Bhave had recused himself from a conflict of interest situation at an early stage in the matter. The apex court, which has posted the matter for hearing in the first week of July, also expressed displeasure at the outright rejection of the committee report and said it was not convinced by submissions that the committee exceeded its limit.

Sebi in its affidavit had stated that pursuant to the apex court’s order of March 28, 2011, it had reconsidered the Special Committee order of December 4, 2008, at its meeting held on April 26, 2011. ?After detailed deliberations and keeping in view the spirit of the observations of the SC, the board decided to reconsider the decision … it would reconsider the report of the Committee with a view to accepting the same,? the affidavit filed by Praveen Trivedi, joint legal advisor, stated.

After the IPO scam, the ministry of finance had constituted a committee consisting of then Sebi board members G Mohan Gopal, presently Director of National Judicial Academy, and V Leeladhar.

The committee in December 2008 had passed three orders and found that NSDL had failed in its duty of supervising, investigating, monitoring data and directed it to conduct an independent inquiry to establish individual responsibility.

Later in December 2010, Mohan Gopal had written to the Prime Minister that the Sebi board had ?abused? its powers to protect Bhave from being subjected to any independent inquiry with ? respect to his actions as NSDL Chairman? during the IPO Scam. Moreover, the committee had given serious remarks over the manner in which Sebi was functioning and handled the entire episode. It noted that the Sebi had failed to carry out its’ regulatory role adequately and recommended the market regulator to make a Code of Conduct for depositories.

The report was placed before the Sebi on January 21, 2009 for action. However, the capital market regulator decided to withhold orders of the Committee. Later, Sebi on November 11, 2009 held the findings of the committee were ?outside the confines of delegation? and were without the authority of law. It further said the orders were ?null, void and non-est? and decided to look into the matter afresh.

The apex court on March 28 had given a choice to Sebi to revisit its decision of giving a clean chit to NSDL in a matter related to share allotment irregularities in various initial public offers during 2003-2006 period.

The leading national depository, which enables holding of shares and other securities in demat or electronic format, came under the scanner in 2006 after a probe into IPO scam.