SAT Rejects Axis Bank's Plea in Karvy Case

New Delhi, Jan 12 (PTI) The Securities Appellate Tribunal (SAT) on Friday rejected
Axis Bank's appeal with respect to releasing shares that were pledged by Karvy Stock Broking Ltd in favour of the private sector lender.

The lender's appeal was for passing appropriate orders directing Sebi, NSDL and NSE to comply with the SAT's ruling last month and remove all the lock-in and all other obstacles with respect to the invocation of the pledged shares.

In its order passed on December 20, SAT quashed Sebi's two orders passed in January 2020 and December 2019 that barred lenders from invoking the pledge on shares in the Karvy Stock Broking matter. Sebi, NSDL and NSE were also directed to release the shares in four weeks.

The tribunal's ruling had come on appeals filed by Axis Bank, HDFC Bank, ICICI Bank, IndusInd Bank and Bajaj Finance against the two Sebi orders.

Dismissing Axis Bank's plea on Friday, SAT clarified that "four weeks from the date of the order were available both to Appellant Axis Bank and to Sebi, NSE and NSDL to implement the directions given by this tribunal in its order dated December 20, 2023".

According to the tribunal, the unilateral action on the part of Sebi, NSE and NSDL
in transferring the shares to investors was "illegal and without jurisdiction".

"... the tribunal went on to give separate directions for the appellant Axis Bank
and for other appellants. The separate directions were required due to the status of pledged shares as for the shares pledged to Axis Bank this tribunal had directed parties to maintain status quo vide its order dated December 17, 2019," SAT said on Friday.

For other appellants, the tribunal said the pledged shares had been transferred to the clients of the broker by the respondents.

Against this backdrop, the SAT on Friday said its December order "needs to be read in totality".

In the December order, the tribunal, as an alternative option, had directed the respondents "to compensate the appellants (lenders) with the value of the underlined securities pledged in their favour along with interest 10 per cent per annum within the same period".

Sebi and NSDL have already filed an appeal before the Supreme Court, challenging the order of the SAT.

Axis Bank's counsel argued that leeway of four weeks was given only in the case of appellants other than Axis Bank. For Axis Bank, the order of the Tribunal became effective immediately and therefore, there is no restriction whatsoever on the bank from invoking the pledge of shares created in its favour and selling the shares to the extent of its full and complete dues.

Counsels of NSDL and Sebi stated that they did not press for stay at the time of pronouncement of orders on December 20, 2023, as they believed that the tribunal had granted four weeks time for compliance of directions in the said order.

The total dues payable to Axis Bank, HDFC Bank, ICICI Bank, IndusInd Bank and Bajaj Finance was over Rs 1,400 crore, according to Sebi's order passed in December 2019.

An outstanding amount of Rs 80.64 crore, along with interest, was due to Axis Bank from Karvy, Rs 642.25 crore to ICICI Bank, Rs 344.5 crore to Bajaj Finance, Rs 208.5 crore due to HDFC Bank, and Rs 159 crore to IndusInd Bank, the order had said.

The case pertains to the securities held by Karvy, which were allegedly used by the brokerage for borrowing courtesy of the power of attorneys that they had. The securities held by over 83,000 clients were given back to them after Sebi's direction. These five lenders had given loans to Karvy against pledged securities.