Highly placed SEBI sources said that at a recent meeting of the committee on making public issues through the secondary market route, SEBI officials pressed for allowing issue of shares in paper form as well. The move was resisted by some stock exchanges who contended that the use of a stock exchange infrastructure should be restricted to demat shares as handling paper would not be possible.

SEBI officials, however did not relent. SEBI sources said that the matter was even discussed at the primary market advisory committee which was sought to beconvinced about the time not being ripe yet to move the primary market to a mandatory demat mode.

Senior SEBI executive director OP Gahrotra in charge of primary markets was not available for comment as he is out of town and slated to be back only by April 15.

What is intriguing is the manner in which SEBI has handled the entire issue. The SEBI board around September last year took the decision to allow all fresh issuances only in demat mode. It was announced that a certain date would be worked out after consultation with market players. SEBI officials at that point of time told The Financial Express that the date should be sometime in November.

Then a series of meetings were held with various market players like registrars, merchant bankers and brokers. Everyone was in agreement with the reform.

The SEBI executive director in charge of primary markets at that point of time was Vijay Ranjan and just when he was close to finalising the guidelines he was transferred and the charge of primarymarkets was handed over to Gahrotra.

In the meantime, SEBI also made considerable headway in creating the module where primary market issuance could take place through the trading and clearing systems of stock exchanges. The idea was to cut down the time and cost to investor on public issue allotment and the clearing house was sought to be the collection centre for shares requests and cash as well. It was presumed that the allotment would be only in demat form which would drastically lower the load on the clearing house.

SEBI, however, stunned the committee when it met recently by saying that the issuance would be in paper form as well. "This itself shows that we are not for the moment concentrating on implementing our earlier decision to push the primary market to a scripless mode," said a top SEBI official.

With the levels of dematerialisation rising significantly over the past six months, so much so that SEBI itself has expanded the list of scrips for mandatory demat trading, market players haveexpressed surprise over SEBI's sudden backtracking.