Mumbai: Karvy Stock Broking Ltd which is currently embroiled in allegations of misuse of client securities has got relief against debt recovery proceedings filed by ICICI Bank. Telangana High Court in an order last week stayed the Debt Recovery Tribunal (DRT) proceedings.
The high court in its order noted that the DRT proceedings were “ex-parte” in nature and thus prejudicial against Karvy.
“The Company has approached the Honourable High Court of Telangana challenging the impugned order passed by the DRT. The Honourable High Court, having found the impugned order to be arbitrary and unreasonable, has stayed the operation of the impugned order, vide its order dated 24 December 2019,” said Karvy in an emailed statement.
ICICI Bank Ltd had extended a loan of ₹642 crore to the stock broking against a loan facility of ₹700 crore against share pledges and other collateral.
The problem for the lender started when it was rendered incapable of invoking the pledge as on 22 November Securities and Exchange Board of India (Sebi) passed an interim order against Karvy, where it restricted share transfer except to beneficiary owners. Sebi in the interim order found that the shares pledged by Karvy belonged to clients and thus these were transferred by National Securities Depository Ltd (NSDL) to client accounts on 2 December.
ICICI Bank along with three other lenders including Bajaj Finance Ltd, HDFC Bank and IndusInd Bank had then approached SAT for relief against Sebi order and NSDL action as the lenders held bonfaide pledges and thus were beneficiary owners of these shares.
The lenders were unable to get relief from SAT and Sebi which lead to ICICI Bank approaching DRT for recovery of its own by taking possession of the collateral. ICICI Bank in its plea with DRT had also sought that the promoters disclose their assets, and that Karvy Group’s former chairman and managing director, C. Parthasarathy, and director Rajat Parthasarathy should be restrained from leaving the country during the case proceedings .
Following the Telangana High Court order the prayers seeking disclosure of assets, and submission of passport by C Parthasarathy and Rajat Parthasarathy also stand stayed.
The High Court has also directed ICICI Bank to file a reply in the case. ICICI Bank could file a reply by the end of January.
ICICI Bank had moved the DRT plea as its call to repay outstanding amounts was not honoured by Karvy.
As per the court documents filed in Securities Appellate Tribunal or SAT, ICICI Bank had issued a letter to Karvy on 5 November to repay all the outstanding amounts availed by Karvy under the facility agreement.
“The Company has not defaulted in its payment obligations to the ICICI Bank till October 2019, under the facility agreements,” said Karvy in the emailed statement.