Mumbai: The Securities Appellate Tribunal on Wednesday stayed a Securities and Exchange Board of India (Sebi) order rejecting Axis Bank’s request to allow it to invoke the pledge on shares in the Karvy Stock Broking case, said the private lender.
“Axis Bank has filed an appeal before Hon’ble SAT against the Sebi order. The Hon’ble SAT has today granted interim relief to Axis Bank by directing status quo to be maintained on the Sebi order till further hearing of the matter,” said an Axis spokesperson in a release.
The capital markets regulator’s order, dated January 14, came after SAT last month asked Sebi to pass an order by January 15 in the matter.
Last month, Sebi rejected the relief sought by other lenders too, including HDFC Bank, ICICI Bank, IndusInd Bank and Bajaj Finance saying it was not tenable and the remedy for them against Karvy Stock Broking should be sought in civil court.
Axis Bank had moved the tribunal seeking permission to lift the freeze on shares pledged by Karvy that will allow the lender to invoke the pledges. The move came following a Sebi directive to depositories in November that prevented the lenders from accessing the securities pledged by Karvy Stock Broking.
Axis Bank lent Rs 80.47 crore to Karvy Stock Broking in the form of overdraft against shares.
The regulator said, data provided by the National Stock Exchange on pledged securities indicates that securities pledged by Karvy Stock Broking in favour of Axis Bank belonged to its fully-paid as well as partly-paid or unpaid clients.
“Even if securities belonging to fully-paid clients are pledged by the stock broker, such pledge does not pass any title to the pledgee, as the stock broker in such case himself/itself does not possess any title/right over such securities. Thus, pledge of securities, belonging to fully-paid client, is not treated as valid pledge in law,” Sebi whole-time member Ananta Barua said in his order.
“Pledging of securities of unpaid clients required taking of ‘explicit authorisation’ by the stock broker from each such client and in respect of each such pledging. The representor (Axis Bank) has submitted that the PoA (power of attorney) given by the client was sufficient authorisation to create such a pledge. However, I do not agree with such interpretation given to the scope of PoA,” the Sebi member said.
If the bank is able to show proof of authorisation that securities having value of Rs 13.69 crore belong to unpaid clients, such securities can be released to it after following the procedure under supervision of NSE, Sebi said in its order.
Source: Economic Times