Karvy Stock Broking has got interim relief from the High Court (HC) of Telangana against ICICI Bank’s plea for initiating debt recovery proceedings against the broking house.
In an application dated December 9, ICICI Bank had approached the debt recovery tribunal (DRT) in Hyderabad against Karvy Stock Broking.
The HC in its order last week observed that DRT’s order was ex parte and prejudicial to Karvy Stock Broking and, therefore, the ‘interim suspension’ shall be granted, according to Karvy’s application.
In ICICI Bank’s DRT plea, Karvy Group’s Chairman and Managing Director C Parthasarthy was also listed as one of the respondents.
The court has also sought application from ICICI Bank and DRT to explain why Karvy’s plea should not be accepted.
According to sources, other lenders are also likely to approach DRT after they were unable to secure their interests by approaching the Securities Appellate Tribunal (SAT).
Earlier, ICICI Bank, along with HDFC Bank, Axis Bank, and IndusInd Bank, had moved SAT to seek relief after the National Securities Depository (NSDL) restored the client securities that Karvy had pledged with lenders back to the affected clients.
The lenders cumulatively have lent close to Rs 1,000 crore to Karvy.
Following NSDL’s move — which stemmed from the Securities and Exchange Board of India’s (Sebi’s) November 22 order — banks were left in lurch as they lost accessibility to the collateral shares.
In its interim order in November, Sebi barred the firm from enrolling new clients for alleged misuse of client funds.
Sebi also said that depositories and stock exchanges shall initiate appropriate disciplinary regulatory proceedings against Karvy for misuse of clients’ funds and securities, according to their respective bylaws, rules, and regulations.
Taking cue from this, NSDL reversed shares back to clients, and the National Stock Exchange suspended membership of Karvy Stock Broking, citing non-compliance with the regulatory provisions of the exchange.