In its 17-year history, this is reportedly the first time that Sebi's board has nullified quasi-judicial orders of one of its own benches. The orders, if implemented, could have seriously embarrassed its chairman C B Bhave for his accountability in relation to an earlier assignment.

The officially stated reason for this extraordinary interception on November 9 is that the two orders passed on December 4, 2008 had not spared even Sebi for its regulatory failings in the 2005 IPO scam, in which tens of thousands of fake demat accounts had been opened to corner the shares reserved for small investors.

These two orders were actually part of a set of three orders pertaining to National Securities Depository Limited (NSDL), which was headed by Bhave during the scam and, as the biggest depository in the country, was accountable for the bulk of the fake accounts.

Soon after Bhave took over as Sebi's chairman in February 2008, its board set up an independent committee of two part-time members to deal with the three NSDL-related cases, in a public show of managing his conflict of interest.

Having sat on them for 11 months, the board published the three orders last week "in the interest of transparency", that too only after nullifying two of them on the basis of a legal opinion obtained from a former head of the Securities Appellate Tribunal (SAT), C Achuthan.

While recommending the nullification of those two NSDL-related orders, Achuthan cited a solitary precedent from 2006 when Sebi had apparently withdrawn an order passed by an adjudicating officer. But even for that, Achuthan conceded that "the circumstances leading to such withdrawal are not known to me."

Though the findings against Sebi have been cited as the reason for nullifying two of the NSDL-related orders, a close reading shows that even the third order, which has been allowed to stand, criticized the functioning of the market regulator.

As in the case of the two nullified orders, the third order too recommended a corrective measure: Sebi's "charge sheets must be as specific as possible, clearly identifying the legal standard violated and setting out how such violation may have taken place."