SAT overturns NSE directive to Axis Bank in Karvy Stock Broking case

0

In relief to Axis Bank, the Securities Appellate Tribunal (SAT) quashed an instruction issued by NSE that the funds in Karvy Stock Broking’s bank account are the assets of the stock exchange defaulting committee.

The order came after Axis Bank contested the communication issued on December 8, 2020 by NSE believing that Karvy’s bank accounts become the assets of the stock exchange defaulting committee since the stock broker was declared in default and excluded. membership in the stock market.

Axis Bank disputed the communication on the grounds that the exchange does not have the power to instruct the bank to freeze its accounts over which the lender has a banking lien.

She also claimed that Axis Bank is a commercial bank and not a commercial member and therefore is not bound by Sebi laws, including the bye-laws of the National Stock Exchange of India Ltd (NSE).

“We are of the opinion that Respondent No. 1 (NSE) lacked jurisdiction to consider the funds in the account of Karvy Stock Broking Ltd to be committee assets in accordance with NSE implementing laws” , the SAT said in a statement. order on Monday.

Citing NSE implementing laws, the court said the devolution of assets to the defaulter’s committee is limited and cannot include all of the assets of Karvy, the defaulter. Only such a guarantee deposited on the stock exchange belongs to the defaulters’ committee.

In addition, other sums, securities and other assets due, payable or deliverable to the defaulter by any other business member are also vested in the defaults committee, he added.

“The rules of procedure 12 apparently make it clear that a failing committee can only issue instructions against the commercial member and may not issue any instructions to a third party, namely the appellant (Axis Bank) which is not certainly not a commercial member, ”noted the SAT. .

He further stated that NSE had no jurisdiction to make such an order based on Sebi’s confirmation order.

The confirmatory order asked NSE to take appropriate action against Karvy for violating its bye-laws. It also allowed the exchange to invite and process customer complaints in accordance with its internal rules, the court noted.

“The disputed communication issued by NSE dated December 8, 2020 invoking Enforcement Act 11 of its implementing statutes is wholly incompetent and is quashed,” the SAT said.

It was alleged that as part of its banking activities, Axis Bank granted several credit facilities to Karvy, which owed Rs 165 crore as well as interest to the lender.

Further, it is alleged that on January 27, 2021, Axis Bank had Rs 8.27 crore in the lender’s bank account and term deposit accounts. Of the Rs 8.27 crore, a sum of Rs 7.98 crore was wholly owned by Karvy and the balance of Rs 28.66 lakh was owned by customers and other parties.

Sebi, through an interim order in November 2019, imposed several restrictions on Karvy, including prohibiting the brokerage house from taking on new clients as part of its brokerage business because it had abused its securities. clients by pledging them without authorization.

Among other things, the regulator ordered the stock exchange to take appropriate action against Karvy for violating exemption laws. This order was confirmed by the regulator in November 2020.

In addition, Karvy was declared in default in November 2020 under the statutes of NSE and was therefore removed from his position as a member of the exchange as a commercial member.

(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)

Dear reader,

Business Standard has always strived to provide up-to-date information and commentary on developments that matter to you and have broader political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering has only strengthened our resolve and commitment to these ideals. Even in these difficult times resulting from Covid-19, we remain committed to keeping you informed and updated with credible news, authoritative views and cutting-edge commentary on relevant current issues.
However, we have a demand.

As we fight the economic impact of the pandemic, we need your support even more so that we can continue to provide you with more quality content. Our subscription model has received an encouraging response from many of you who have subscribed to our online content. More subscriptions to our online content can only help us achieve the goals of providing you with even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital editor

Share.

About Author

Comments are closed.