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IPO scam probe: Former SEBI member says board shielded Bhave

Press Trust of India New Delhi | Updated on May 08, 2011

Writes to PMO about IPO scam probe





A former SEBI member has written to the Prime Minister's Office alleging that the regulator's board “abused” its powers to protect the previous Chairman, Mr C.B. Bhave, from the IPO scam investigation.

In the letter written on December 24, 2010, Mr G. Mohan Gopal, wrote, “As an outgoing (part-time, independent) member of the SEBI Board, I write to convey my strong concern about the gross abuse of power and corrupt practices in the SEBI Board over the last two years to protect SEBI Chairman C.B. Bhave from being subjected to independent inquiry with respect to his actions as Chairman of NSDL during IPO scam.”

Independent inquiry

Mr Gopal alleged that the board protected Mr Bhave from being subjected to any independent inquiry with “respect to his actions as National Securities Depository (NSDL) Chairman” during the scam.

The IPO scam relates to irregularities in share allotment in various initial public offerings between 2003 and 2006.

The letter was made public by the Prime Minister's Office in an RTI reply to activist Mr S.C. Agrawal.

The PMO has said it has forwarded the letter to the Finance Ministry for action.

Mr Bhave decline to comment.

The Finance Ministry said in its RTI reply dated April 8 that it has forwarded the letter to the SEBI for comments and even sent three reminders; but there has been no reply.

The Finance Ministry had set up a committee consisting of two SEBI members — Mr G. Mohan Gopal, now the National Judicial Academy director, and Mr V. Leeladhar — to look into the IPO scam. The committee had passed three orders and found that the NSDL had failed in its duty. It had also passed remarks against the manner in which SEBI had functioned during the time of the scam.

Mr Mohan Gopal, in his letter to the Prime Minister, has alleged that his “objections to illegal and unethical actions” did not elicit any response from the board and he was “isolated and threatened”.

“I brought issues to the attention of the Finance Secretary at an early stage, to no avail mainly because the representatives of the Ministry of Finance on SEBI Board (no longer with the Ministry of Finance) were an active part of developing and implementing the impugned actions,” he wrote.

NSDL was given a clean chit last year by SEBI when Mr Bhave was its chairman.

Mr Bhave had recused himself from the SEBI board meeting in February 2010 when the NSDL matter was discussed, as he had previously headed the depository.

Clean chit

The Supreme Court had asked SEBI to reply whether it would revisit its decision to give a clean chit to NSDL in the 2006 IPO scam. The apex court had expressed concern over SEBI's outright rejection of the report, and had asked the market regulator to give its stand.

SEBI did a U-turn in the Supreme Court last week when it filed an affidavit agreeing to restore orders indicting Mr Bhave in the IPO scam.

Published on May 08, 2011

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