IPO scam: Apellate tribunal sets aside SEBI order on Karvy

Mumbai, May 5

The Securities Appellate Tribunal has set aside SEBI’s disgorgement order on Karvy Stock Broking Ltd in the IPO allotment case.

This is in line with SAT’s November 2007 order setting aside the same disgorgement order on nine other entities, including National Securities Depositories Ltd.

SAT said that SEBI, in its ex-parte order of November 2006, has violated the principles of natural justice in not calling upon the appellant to show cause why it should not be ordered to disgorge the amount determined in the order. “The impugned order deserves to be set aside on this ground alone.”

The scam related to certain entities cornering IPO shares (in 2003-05) reserved for the retail category by using fictitious demat accounts. These demat accounts were ultimately transferred to the financiers through key operators. The financiers made their gains on the first day of listing of these shares.

SEBI’s disgorgement order of November 2006 had directed 10 entities including Karvy to jointly and severally pay up Rs 115.82 crore towards disgorgement (paying up money made through illegal or unethical gains).

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