SAT extends status quo on Axis Bank-Karvy Stock Broking case till Jan 31

The Securities Appellate Tribunal (SAT) has extended its status quo order in case of Axis Bank and Karvy Stock Broking till January 31.

On January 15, Axis Bank had moved SAT seeking relief against an order passed by the Securities and Exchange Board of India (Sebi), which stated pledging of shares by Karvy -- where the clients had 'fully paid' -- was legally invalid.

Following this, SAT granted interim relief to Axis Bank, as in the past National Securities Depository had reversed securities to clients on the basis of Sebi’s November 2019 order pertaining to the Karvy case.

The Sebi in its order had identified Rs 171.74 crore worth of shares where clients had fully-paid the dues. Axis Bank had submitted that even in these shares there was indebtedness and the data needed to be re-examined.

In its order, Sebi said the transfer of unpaid client shares worth Rs 13.69 crore, which were pledged in favour of Axis Bank by Karvy, can be allowed if the bank is able to furnish proof of authorisation by each client.

Sebi’s whole-time member also observed that pledging of securities of unpaid clients required ‘explicit authorisation’ from each client and power of attorney (PoA) given by the clients was not sufficient authorisation to create such a pledge. Axis Bank in its arguments had said that the PoA was sufficient authorisation, the order pointed out.

Axis Bank had extended an overdraft facility to Karvy Stock Broking, against which the share pledges were created. Karvy owed Rs 80.47 crore to Axis Bank.