NATIONAL SECURITIES DEPOSITORY LTD. Vs. SEBI

JUDGEMENT

(1.) IN this appeal filed under section 15T of the Securities and Exchange Board of India Act, 1992 ('SEBI Act') the appellant seeks to challenge the directions contained in the order passed by the respondent on 4th December, 2008 ('impugned order' for short) which was served upon the appellant on 29th July, 2011. By the said belatedly served order, the appellant is called upon to carry out two directions which according to the appellant are wholly unjustified in view of the events that took place prior to the passing of the impugned order and subsequent to passing of the impugned order. The controversy in the present case arises on account of fraud unearthed by the Securities and Exchange Board of India ('SEBI') constituted under the SEBI Act relating to the first sale of shares by 21 private companies to the general public known as initial public offering ('IPO's').

(2.) SEBI Act is enacted by the Parliament with a view to promote orderly and healthy growth of securities market and for investor's protection. SEBI, inter alia, monitors the activities of the stock exchanges, mutual funds, merchant banker's, etc., to achieve goals with which the SEBI Act has been enacted.

(3.) APPELLANT and Central Depository Services (India) Ltd. ('CSDL') are the only two depositories providing depository services in India. The basic function of depositories is to regulate the demat accounts opened by investors with DPs. Under the depository system, depositories do not deal directly with the individual investors who are demat account -holders and it is DPs who have investors as clients to whom the said DPs serve directly. The transactions of individual investors are reflected in the demat accounts maintained by DPs on the basis of intimations given to the concerned DP. The detailed duties, responsibilities and obligations of the depositories and the DPs are laid down in the Depositories Act and the regulations framed thereunder as also under the bye -laws framed by the depositories which are duly approved by SEBI.