Relief for HDFC Bank as SAT stays Sebi directive on Rs 160 cr transfer

Matter pertains to BRH Wealth Kreators share-pledge fiasco; SAT cites lender's financial strength while asserting it won't run away or become insolvent

The Securities Appellate Tribunal (SAT) has granted relief to HDFC Bank by staying on an order issued by markets regulator Sebi, which directed the lender to transfer over Rs 160 crore in the matter pertaining to BRH Wealth Kreators’ share pledging.

“We find that the appellant is one of the largest private sector bank and as per balance sheet, it has assets worth Rs 1,654,228 crore and, therefore, has sufficient financial strength and ability to furnish the amount as per the impugned order. It is not a case where the bank will run away or will become insolvent. We accordingly stay the effect and operation of the impugned order till further orders...” the SAT said.

The tribunal directed HDFC Bank to give an undertaking to Sebi that it will abide by the result of the appeal and the directions given therein within four weeks from the date of the disposal of the appeal.

Last month, Sebi imposed a penalty of Rs 1 crore on HDFC Bank for invoking securities pledged by BRH Wealth, allegedly in violation of an interim order. Further, the bank was also directed to transfer Rs 158 crore, along with an interest of 7 per cent per annum from October 14,2019.

HDFC Bank had given a loan to BRH Wealth against shares. The broker had given a declaration that it was the absolute owner of the securities and they were not that of its clients.

However, BRH had indulged in several irregularities, which led to an interim order against it in October 2019. In March 2020, Sebi issued a show cause notice to HDFC Bank after it invoked shares pledged by BRH.

The SAT observed the interim order noted that certain securities were pledged by BRH to HDFC Bank, but didn’t restrain the lender from encashing the pledged securities. The tribunal said whether the securities have been rightly invoked by HDFC Bank will require further consideration. It directed Sebi to file its reply in three weeks and posted the matter to April 7 for final disposal.