SAT denies relief to Axis Bank in Karvy case, asks it to approach Sebi

Lender had approached tribunal seeking shares pledged by Karvy to it be unfreezed, saying the clients who owned the securities owed money to Karvy and therefore the pledge was good in law

The Securities Appellate Tribunal (SAT) has denied relief to Axis Bank in the Karvy case. The private lender had approached the tribunal seeking the shares pledged by Karvy to the bank be unfrozen, so that it invokes the pledges.

On Tuesday, the SAT Bench comprising of Justice Tarun Agarwala, Justice MT Joshi, and Dr C K G Nair, observed that "though the learned senior counsel for the appellant seeks to suggest a solution stating that some of the investors, in fact, owe dues to Karvy and hence, securities to the extent of such dues rightly belonging to Karvy at least could be used by the appellant to invoke the pledge...”, the Bench was not in position to ascertain veracity of information made available by Karvy to the bank.

It directed the bank to make a representation before the Securities and Exchange Board of India (Sebi).

Earlier, Axis Bank had pleaded before the SAT that the decision to freeze shares was wrongfully extended to an account where clients actually owed dues to Karvy, and so these shares belong to the broker.

The bank's counsel said in such instance the pledge by Karvy was tenable and the lender should be able to invoke the pledge.

As of December 7, 2019, Karvy Stock Broking owed Rs 81 crore to the bank which was given in the form of overdraft against shares.

The National Securities Depository, Sebi, and Karvy Stock Broking were made respondents to the plea. The NSDL move to freeze shares followed Sebi's November 22 interim order that barred Karvy from taking new clients for its alleged client fraud to the tune of Rs 2,000 crore.