Security and Exchange Board of India (SEBI), the market regulator has decided to reconsider the clean chit given to National Securities Depository Ltd. (NSDL) regarding the IPO scam in year 2006. During that time NSDL was headed by Mr. C. B. Bhave who was later appointed as chairman of SEBI.
As Mr. Bhave was heading SEBI during the course of investigation, two members committee was appointed to oversee the SEBI proceedings and eliminate the conflict of interest.
The scam is related to the irregularities in the allotment of shares in various IPOs during 2003- 06. The issue reached Supreme Court when a special leave petition was filed in this regard.
Just after the retirement of Mr. Bhave, Supreme Court rapped the SEBI board for preventing the orders against NSDL to come into effect and stating the report as non-existent and null and void.
Supreme Court passed the judgment that the committee did not act within the framework and terms of reference that were established by the board resolution.
Supreme Court had asked the regulatory body to explain their stand whether they are going to accept the report of the high powered committee probing the IPO related scam in connection with NSDL. Under pressure from Apex Court, SEBI has indicted former chairman Mr. Bhave in the case.
Gopal- Leeladhar committee, the investigating body of NSDL-IPO scam, held that the lax system of NSDL let the creation of fake depository accounts to corner the shares meant for retail investors. Mr. Bhave was indicted for not taking appropriate measures to remove such irregularities in the allotment of shares. This report charged NSDL for failing in its duty to investigate, supervise and monitor the data.