The Securities and Exchange Board of India (Sebi) has refused to provide any relief to the lenders of Karvy Stock Broking Ltd, who had sought to access their pledged shares. The lenders including Bajaj Finance, ICICI Bank, HDFC Bank and IndusInd Bank had lost their control over the shares after they were shifted back to the client’s accounts by the National Securities Depository Ltd (NSDL).
On December 2, all the four lenders had approached the Securities Appellate Tribunal (SAT) and had sought reversal of transferred shares. SAT however, had referred the matter to the Sebi.
In an order delivered late on Friday, Sebi observed that the relief sought by the lenders is ‘untenable’ and “the remedy for them against Karvy Stock Broking should be sought in the civil court,” stated a report filed by Economic Times report.
The lenders had extended around Rs 1,354 crore to the broking firm against pledge shares worth ₹2873 crore as of 16 September 2019. Of the total Rs 1,354, Bajaj Finance, ICICI Bank, HDFC Bank, IndusInd Bank had given ₹345 crore, ₹642 crore, ₹208 crore and ₹159 crore respectively.
The matter pertains to a 22 November Sebi order in which the regulator had banned the broking firm from taking on new clients and trading on behalf of its clients, following an NSE report.
“The securities worth around ₹2300 crore of more than 95,000 clients, were unauthorizedly transferred into this account by KSBL to generate funds for its own/group entities use,” NSE had mentioned in its interim report, which formed the basis of subsequent Sebi order.
Following the report, Sebi immediately acted on it and found that Karvy had disclosed only ₹27.79 lakh of securities in its own account.
“Even if the client securities were pledged, it should be (used) only for meeting the obligation of the respective clients,” a Sebi member Ananta Barua had said as she read out a 12-page order on November 22.
(With input from agencies)