Securities Appellate Tribunal (SAT) has set aside Securities Exchange Board of India’s (Sebi) order of disgorgement of Rs 115 crore against National Securities Depository Ltd (NSDL) and others in the initial public offerings (IPO) demat scam.
Hearing the arguments of NSDL and others, SAT said that NSDL and others should have been given an opportunity by the Sebi to explain their position in the disgorgement case in the IPO demat scam. The regulator should have verified facts and figures properly in this case. Apparently, both the depositories have not gained anything financially in the case for the disgorgement order to be passed against them.
In an order dated November 21, 2006, Sebi asked NSDL and Central Depository Services India Ltd (CDSL), both depositories, to disgorge a cumulative amount of Rs 115 crore.
The regulator said that the NSDL and its depository participants (DPs) Karvy Stock Broking, HDFC Bank, Khandwala Integrated Financial Services, IDBI Bank, Jhaveri Securities, ING Vysya Bank, and Pravin Ratilal Share & Stock Broking need to jointly and severally disgorge an amount of Rs 90 crore within a period of six months.
Similarly, Sebi directed CDSL and its DPs Karvy Stock Broking Ltd and Pratik Stock Vision Pvt Ltd to jointly and severally disgorge Rs 25.80 crore. The Sebi order stated, ?There will be no separate hearing granted to the parties, as the findings of this order will be co-terminus with the findings of the enquiry.?
Sebi said that both the depositories should have ensured that their DPs followed Know Your Client (KYC) norms properly and adequately while opening demat accounts in the IPO scam. With regard to an earlier main order dated April 27, 2007 in the IPO scam, Sebi has in principal agreed to dispose of its directive against NSDL to reconstitute its top management. Sebi stated before SAT that the directions were recommendatory in nature and not compulsory for the entity to follow. Sebi in its order said that NSDL failed to detect the multiple demat scam taking place. The regulator then directed the depository to reconstitute its top management. NSDL and other have challenged Sebi?s order dated April 27, 2006 and November 21, 2006 before SAT.
