NSDL was underled by C B Bhave, former Sebi chief , when the IPO scam was reported. At the time of the investigation, Sebi was headed by M. Damodaran, Bhave's predecessor. In February 2008, Bhave took over as Sebi chief, and was at helm of affairs as Sebi chief for a three-year term. Then U.K. Sinha took over the reins in February of 2011.
The probe by Sebi revealed that, what was kept for retail investors shares were acquired illegally by some large investors through at least 59,000 fake demat accounts.
The two-member panel which investigated the case consisted of director of the National Judicial Academy, G. Mohan Gopal, and V. Leeladhar, former Reserve Bank India deputy governor. In December 2008 they had passed an order against NSDL. Further they had directed that NSDL to conduct an enquiry for assessing the reasons for failure in detecting the fake demat accounts. At that time, both the panelist were members of the Sebi board.
The panel also told NSDL board to conduct an independent inquiry and establish the person responsible for the failure. It also ordered the NSDL to take necessary action and ensure that individual's are accountable for such failure within six months.
A year later, in November 2009, Sebi declared two of three decisions of the committee “null and void", and later in February 2010, withdrew all charges against NSDL. Following a board meeting, Sebi disposed of a show-cause notice issued to NSDL, effectively clearing it of all pending charges.
The issue went to the apex court after a special leave petition was filed by Delhi-based non-governmental organization Manav Adhikar.
On March 28, a Supreme Court bench of justices R.V. Raveendran and A.K. Patnaik inquired why Sebi stopped the order against NSDL going in effect. The bench asked Sebi to reconsider the matter and pass appropriate resolution and place it before the court for further consideration. Then on Monday, May 9, Sebi agreed before the court to take action against NSDL. It is not known when Sebi will take the action.