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2013 (11) TMI 957 - AT - Companies LawIPO irregularity - Whether it was legally permissible for SEBI Board to review its earlier resolutions passed on November 9, 2009 and February 2, 2010 relating to implementation of the impugned order dated December 4, 2008 - During the period 2003 to 2005, SEBI in the course of its surveillance activity investigated into affairs relating to buying, selling or dealing in shares through IPOs of 21 companies - The investigation revealed that many entities had cornered/acquired shares in IPOs of the aforesaid companies by making fictitious applications in the category reserved for retail investors through the medium of thousands of fictitious/ benami applications for IPOs - Newly constituted two member committee passed an order on December 4, 2008 listing therein various lapses on the part of the appellant as well as the respondent in relation to IPO investigation - Held that:- ordinarily it would not be open to the SEBI Board to review resolutions passed by it in its earlier Board Meetings. This is because, once finality is attached to a proceeding, it would not be open to the respondent to re-agitate the issues by reviewing its earlier orders, unless there are compelling reasons to do so. The dispute in the present case, arises from a PIL filled before the Delhi High Court wherein it was alleged that the Board decisions of the respondent dated November 9, 2009 and February 2, 2010 interalia to treat the impugned decision dated December 4, 2008 as non-est was with a view to confer undue benefit to the appellant, because at the material Mr. Bhave, the then Chairman of the appellant had become Chairman of the respondent. Apex Court, had raised the above query in public interest, in the facts of present case, decision of the respondent to reconsider its earlier decisions taken on November 9, 2009 and February 2, 2010 cannot be faulted - respondent could have taken a stand before the Apex Court that after passing aforesaid resolutions on November 9, 2009 and February 2, 2010 SEBI Board became functus officio in relation to implementation of the impugned order dated December 4, 2008. However, in this case, since Apex Court having wide powers under Article 142 of the Constitution to pass such order as is necessary to do complete justice in any matter had called upon the respondent to consider whether its Board would reconsider passing appropriate resolutions in the matter, the decision of the Board to reconsider its resolutions relating to implementation of the impugned order dated December 4, 2008 cannot be faulted. Accordingly, we hold that ordinarily, SEBI Board cannot review its own resolutions, however, in the facts of the present case, for the reasons stated hereinabove, decision of the Board to review its earlier decisions cannot be faulted. If lapses on the part of the appellant in discharging its regulatory responsibilities noticed during the course of investigation itself were sufficient to fix individual responsibility, then, by applying the same yardstick, the two member committee, in view of the lapses on the part of the respondent in discharging its regulatory responsibilities, would have directed the respondent to investigate and fix individual responsibility on their part. The very fact that the two member committee has not passed any such direction against the respondent, clearly shows, that lapses noticed while discharging regulatory responsibilities could not be the basis for ordering fresh investigation. Therefore, the mere fact that certain lapses were noticed during the course of investigation could not be a ground for ordering fresh inquiry to fix individual responsibility especially when the investigation already conducted did not suggest any individual complicity and no fault was found with such investigation carried out by the appellant. Respondent has found lapses on the part of both the depositories viz., the appellant and CDSL. However, the proceedings in the case of CDSL have been closed on the basis of the SAT order dated January 14, 2009 but not in the case of appellant - when the appellant and CDSL stand on the same footing in the matter of IPO irregularities, the decision of the respondent to close the file in the case of CDSL on the basis of the SAT order and continue to proceed against the appellant inspite of the SAT order is unreasonable and unjustified. Depository system is regulated by both the Depositories and the respondent acts as the Apex regulatory authority. After noticing IPO irregularities, both the Depositories as also the respondent have carried out independent investigations. After ascertaining that there is no individual complicity, various remedial measures have been taken from time to time by the two Depositories on their own and also at the instance of the respondent. Therefore, at this belated stage directing the appellant to institute fresh inquiry to fix individual accountability to the exclusion of CDSL is wholly unjustified and unreasonable. Accordingly, we quash and set aside the impugned order dated December 4, 2008. This order, however, will not come in the way of the respondent to seek compliance of any other remedial measures that may be suggested by the respondent with a view to strengthen the Depository system - Therefore, the impugned order dated December 4, 2008 relating to IPO irregularities is quashed and set aside - Decided in favour of appellant.
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