The controversy has risen in the wake of questions being repeatedly raised by the Parliamentary standing committee on finance on the issue.
According to sources close to the development, the Parliamentary panel is of the view that lifting of the ban on trading of these blocks of shares could enable these investors alleged to be allied to the promoter group liquidate their holdings in the market whereas the small investors got stranded.
The moratorium imposed on the bank by the RBI on July 24 last year sent its share prices plunging by over 80 per cent. This issue again came up for discussion at a recent meeting of the high level capital markets committee.
The RBI is learnt to have pointed out that SEBI should have consulted it before deciding on the lifting of the ban order. On the other hand, SEBI officials are of the view that moratorium is not under its jurisdiction.
On the GTB shareholders managing to liquidate their holdings, SEBI is understood to have clarified that such investors had prior information, if at all they had, leaked out from banking sources.
This followed the bank's repeated negotiations with RBI to arrange a strategic investor for a possible bail out which later failed, said sources.
SEBI sources said that they were empowered to act independently and it was not always necessary to keep RBI informed about their orders and rulings.
SEBI chairman G N Bajpai did not answer e-mails sent by Business Standard. The ban order was lifted by SEBI on June 12 2004, but this order was not posted on the web site.
At that time, SEBI had claimed that a notice was sent to the stock exchanges but somehow it did not come to the notice of the public. The RBI also alleged that it was unaware about the lifting of the ban on the trading of these entities.
The GTB shares, which were quoting at Rs 13 before the imposition of the moratorium, went down to Rs 2 after that. The stock exchanges had moved quickly to put the scrip under the trade-to-trade segment.
However, in the aftermath of the moratorium the trading volumes swelled to 1 crore daily as investors rushed to liquidate their holdings.
The entities on whom the ban was imposed and subsequently lifted were 20th Century Securities, Ashok Mittal. Ashok Mittal & Co, Brentfield Holdings, Claridges Investment and Finance, Coral Reef, European Investments, Far East Investments, Kensington Investments, Nishkalp Investments & Trading, Kallar Kahar, a sub-account of CSFB, Phulchand Sons Investments and Trading and Vidyut Investments.