IPO scam case stuck as SAT member recuses

MUMBAI: The outcome of the case between the Securities and Exchange Board of India (Sebi) and National Securities Depository (NSDL) relating to an initial public offer scam six years ago could be delayed further. PK Malhotra, one of the three members, hearing the case at Securities Appellate Tribunal (SAT), recused himself on Thursday saying that he had given his views on the issue to Sebi when he was a part of the law ministry before July 2010.

With the presiding officer of the appellate, Justice NK Sodhi, set to retire later this month, lawyers feel that a judgement in this case could be delayed.

"Normally, it takes around two quarters to get the judgment in the appellate. However, in this case, the outcome is likely to delayed by couple of more quarters," a senior lawyer, practising in the appellate tribunal, said. He requested anonymity as the matter is subjudice.

The appellate set the next date of hearing on December 14. A few stock market operators had cornered shares meant for retail investors in IPOs between 2003 and 2005. A Sebi investigation showed that several thousand benami demat accounts were used to corner shares in several IPOs during this period.

A two-member committee of board members of Sebi - Mohan Gopal and V Leeladhar - passed an order in July 2008 saying that NSDL did not discharge its responsibilities. In February 2010, the Sebi board declared the order of the two-member committee as 'null and void'. After a petition by a non-government organisation, the Supreme Court told Sebi to reconsider its decision following which the regulator reinstated its ruling.

NSDL appealed to SAT in October against the July 2008 order of the two-member Sebi committee, which had asked the depository to conduct an inquiry to find those responsible for the scam.