IPO-demat scam offenders seek legal, board counsel

Mumbai, Nov 27 | Updated: Nov 28 2006, 07:16am hrs
The Securities & Exchange Board of India (Sebi) order on disgorgement in the IPO-demat scam has resulted in the affected companies referring the issue to their boards or taking it up with their lawyers.

The National Securities Depository Ltd (NSDL) board discussed the order in detail on Friday and had decided to take further action only after consulting its legal department. The Central Depository Services Ltd (CDSL) board is meeting on Tuesday to discuss the Sebi order, according to company sources.

Sebi had last week asked the two depositories, along with eight other depository participants (DPs), to disgorge Rs 116 crore jointly and severally to a special Sebi account.

NSDL's liability, along with that of the seven DPs, is Rs 90.02 crore, while that of CDSL and two DPs is Rs 25.79 crore. The liability of Karvy DPwhich is common to both NSDL and CDSLat Rs 52 crore, is more than both NSDLs (Rs 45 crore) and CDSLs (Rs 12.89 crore).

Some entities not named in the disgorgement order but mentioned in an earlier order have hurriedly called in their lawyers. Many of them seem to have misinterpreted disgorgement for plea bargaining. These parties thought that once they paid the undue gains, there would be no further action against them.

Their lawyers have now told them that the demand from Sebi on disgorgement was only to maintain the status quo, and even after receiving the payment, Sebi would go ahead with the appointment of an inquiry officer who would give a final order in the matter.