It was yet another blow for the Securities and Exchange Board of India, with the Securities Appellate Tribunal staying a portion of its IPO order.
An interim order passed by the Tribunal today ruled that Sebi had no power to issue directions to the promoters of the depositories to revamp their management.
The National Securities Depository Limited had appealed to SAT against the IPO order, which alleged involvement of the depository in the IPO scam.
The Tribunal said, "We are prima facie of the view that the respondent board has no power to issue directions to the promoters of a company to revamp its management. The direction in paragraph 17.14 of the impugned order, directing the promoters of the appellant to revamp the management will therefore remain stayed during the pendancy of the appeal."
One of the primary grievances of NSDL was that even though the order was interim in nature and pending final investigations, Sebi had recorded firm findings on the issues involved which were likely to prejudice the case. The tribunal viewed this grievance favourably.
Interestingly, more than a month after Sebi directed the promoters of depositories to "take appropriate action including revamping the management", the promoters had not taken any action.
Legal experts said that non-compliance with directions issued under Section 11/11B could attract prosecution, though Sebi had not taken up the matter further to ensure compliance.
This is yet another in a series of setbacks the ex parte interim order on the IPO scandal that Sebi has faced. The capital market regulator had to reverse the order against Indiabulls, a day after the order was passed.
Karvy, which was one of the prime accused in the scam, also got a breather when Sebi later ruled that existing depository accounts with Karvy need not be transferred to any other DP and business in these can continue in consonanace with an earlier ruling by the Andhra Pradesh High Court.
Similarly, the Gujarat High Court granted interim stay against Sebi's order banning stockbroker Saumil A Bhavnagari -- charged by Sebi as a financier in the IPO scam -- from dealing in the securities market.
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