Mumbai: Axis Bank one of the lenders to Karvy Stock Broking Ltd on Wednesday got interim relief from a Securities and Exchange Board of India (Sebi) order, which had ruled that it found indebtedness only in securities worth ₹13.69 crore.
"Axis Bank has filed an appeal before Hon’ble SAT against the Sebi Order. The SAT has today granted interim relief to Axis Bank by directing status quo to be maintained on the Sebi order till further hearing of the matter," said a spokesperson for Axis Bank in an emailed statement.
Axis Bank is appealing against the Sebi directive as it believes that more of the client securities were pledged by Karvy with client consent to secure funds, said a person with direct knowledge of the matter.
On 22 November, Sebi barred Karvy from acquiring new clients and from using power of attorney, thereby preventing the company from trading on behalf of clients, after the broker allegedly transferred clients’ money for other purposes and indulged in trades that were not authorized by them. Instead of pledging its own shares, Karvy pledged shares belonging to clients and used them to raise funds. This pattern was followed in lenders including - ICICI Bank, IndusInd Bank, HDFC Bank, Bajaj Finance. All these lenders had appealed against the Sebi order stating that it was a bonafide pledge, but they were unable to get relief from the market regulator.
The case of Axis Bank is different from other lenders. Axis Bank has said in its appeals to Sebi and Securities Appellate TribunalSAT that the securities did belong to the clients and Karvy was authorised by clients to pledge them for raising funds. These securities belonged to unpaid clients.
Sebi on Tuesday night observed that there was indebtedness in securities worth ₹13.69 crore and for which Axis Bank can invoke the pledge.
"The value of the securities belonging to fully paid client is Rs. 171.74 crores and value of the securities of other than fully paid clients is Rs. 13.69 crores," Sebi said in its 14 January order.
Axis Bank, however, believes that more of the securities were unpaid. Axis Bank is claiming dues of ₹82 crore.