The Securities Appellate Tribunal (SAT) on Wednesday set aside the orders passed by the Securities and Exchange Board of India against the two depositories, NSDL and CDSL, in the IPO scam that took place during 2003-05. Sebi had imposed a fine of Rs 5 crore on National Securities Depository Ltd and Rs 3 crore on the Central Depository Services (India) Ltd after its investigations found that the two depositories had faltered in their functioning. This, it was stated, resulted in cornering of large number of shares reserved for retail investors in IPOs.
These shares were acquired by many entities through benami applications. On allotment, shares were transferred to demat accounts of key operators who, in turn, transferred them to those who had financed the purchases. These financers sold the shares on listing and made huge profits. Sebi charge was that the two depositories facilitated the key operators to open benami accounts and failed to notice the malafide intent.
The Wednesday SAT order said, ?certain elements have misused the facility for cornering IPO shares but the responsibility for abuse cannot be laid at the doors of depositories.?
The Tribunal said Sebi and the two depositories have to work in tandem to secure the interests of the investors and the securities market. The depositories are also responsible market intermediaries and they are not expected to work at cross purposes with Sebi.
SAT observed in the IPO scam case, the follow up action ought to be decided by Sebi and the two depositories together, rather than through Sebi punitive action against them. The order said most of the data on the basis of which Sebi has conducted investigations into the IPO scam and fixed responsibilities on the key operators and the financiers has emanated from the data bases of the two depositories.
?Having relied upon such data from the two depositories without having any doubts about its integrity, we do not think it is open for Sebi to allege lack of data integrity in respect of NSDL,? SAT observed. ?The charges against both the appellants fail and their appeals succeed. The impugned orders are set aside leaving the parties to bear their own costs,? the SAT order added.