SAT upholds Sebi order against Axis Bank

The Securities Appellate Tribunal (SAT) has upheld the order passed by the Securities and Exchange Board of India (Sebi) against Axis Bank, where the bank was asked to pay a penalty of Rs 2,00,000 for failing as a debenture trustee.

Sebi had penalised the banking major in March after investigations revealed that there were several deficiencies in the bank’s functioning as a debenture trustee. The regulator probed the books since 1995.

While dismissing the appeal, SAT observed that debenture trustees cannot have the same set of individuals on its board and that of the issuer company. Further, an debenture trustee cannot lend money to a issuer company.

Sebi investigations had revealed that Shardul Shroff was a common director on the boards of both Axis Bank and Noida Toll Bridge at the time, when the bank agreed to act as a debenture trustee. Similarly, Rama Bijapurkar was a director on the board of Axis bank and Mahindra & Mahindra Financial Services at the time of accepting the offer as trustee.

“The noticee (Axis Bank) has lent to the company (HCC) a loan agreement dated September 29, 2008. The noticee also lent loan to Jindal Stainless before its Rs 200-crore issue opened in May 2004. The same are not in compliance with the provisions 13A (b) of the regulations, as the notice cannot act as a trustee to the company it has lent monies,” the Sebi order had said.

Incidentally, the regulator had imposed a penalty of Rs 2,00,000 and observed that the “amount of disproportionate gain or unfair advantage to the notice (Axis Bank) or loss caused to the investors as a result of the violation(s) is not quantifiable.” Further, there was nothing on record to show that the noticee had a past record of default, it had said.