Legal

Karvy case: SAT halts further transfer of client securities after lenders challenge SEBI decision

Updated : December 03, 2019 01:16 PM IST

The Securities Appellate Tribunal (SAT) has instructed National Securities Depository (NSDL) to halt transfer of the balance investor shares that Karvy Stock Broking had pledged with lenders.

This ruling must be seen in the backdrop of SEBI's move on December 2, where it mandated transfer of securities worth Rs 2,013.77 crore to over 83,000 clients of the affected 90,000 Karvy investors. Most of the remaining accounts are in dispute with Karvy Stock Broking, so they may get their money/securities after clearing dues with Karvy.

This SAT ruling now puts a question mark on the receipt of securities for these investors.

HDFC Bank and ICICI Bank had approached SAT over transfer of shares to Karvy's clients. Bajaj Finance too has contested the Securities and Exchange Board of India's (SEBI) decision to return to Karvy’s clients the securities that the broking house had illegally pledged to raise money for itself.

The banks have sought immediate freezing of the securities transferred to clients' accounts. HDFC Bank has lent Rs 400 crore to Karvy based on these pledged shares.

The counsel appearing on behalf of the banks sought bank's consent before the pledged shares are transferred. He argued that going forward banks will be forced to seek additional collateral from all brokers due to SEBI's December 2 action.

The SAT also asked the National Stock Exchange (NSE) to make a decision on Karvy's trading license by December 6.

The NSE and Bombay Stock Exchange (BSE) had on December 2 suspended Karvy's trading license.

(Source: Moneycontrol.com)