BackHC relief to Karvy was merely on one ground, says ICICI Bank
Lender says it is in the process of challenging the HC order on appointment of advocate commissionerKarvy Stock Broking Ltd is embroiled in allegations of misuse of client securities
PremiumMUMBAI : ICICI Bank, which had taken Karvy Stock Broking Ltd to Debt Recovery Tribunal (DRT) on repayment of over ₹629 crore of dues, has said the Telangana court had granted relief to the broking firm on only one ground. The high court had stayed the direction only to the extent of appointing an advocate commissioner to take possession of the properties belonging to Karvy.
ICICI Bank is in the process of appealing against this relief as well, the bank said in a statement to Mint.
The other directions of DRT, including asking Karvy to deposit sufficient security for ICICI Bank’s dues within 15 days and restraining them from alienating/ transferring, encumbering or creating any form of third party interest, are still operational.
"It (high court) has neither stayed the DRT proceedings as a whole, nor stayed the orders in (a), (b) and (d) above. Accordingly, DRT orders requiring the defendants to deposit sufficient security and imposing a non-disposal injunction on the properties have been upheld by the high court, and continue to be binding on the defendants (Karvy)," said ICICI Bank in an emailed statement.
ICICI Bank is in the process of challenging the high court’s order in relation to the appointment of the advocate commissioner, spokesperson for the bank added.
Karvy, which is embroiled in allegations of misuse of client securities, was dragged to DRT by ICICI Bank in the first week of December. Later Karvy approached Telangana high court for relief against DRT proceedings. The high court noted that the DRT order on one ground limited to appointment of advocate commissioner authorising to take possession of Karvy's properties was “ex-parte" in nature and thus prejudicial to Karvy.
ICICI Bank Ltd had extended a loan of ₹642 crore to the stock broking firm against a loan facility of ₹700 crore against share pledges and other collateral. In its plea in DRT, ICICI sought recovery of dues close to ₹629 crore.
The problem for the lender started when it was rendered incapable of invoking the pledge as on 22 November the Securities and Exchange Board of India (Sebi) passed an interim order against Karvy, where it restricted share transfer except to beneficiary owners. Sebi in the interim order found that the shares pledged by Karvy belonged to clients and thus these were transferred by the National Securities Depository Ltd (NSDL) to the accounts of clients on 2 December.
ICICI Bank, along with three other lenders including Bajaj Finance Ltd, HDFC Bank, and IndusInd Bank, had then approached Securities Appellate Tribunal (SAT) for relief against the Sebi order and NSDL action as the lenders held bona fide pledges and thus were beneficiary owners of these shares. ICICI Bank had issued a letter to Karvy on 5 November to repay all the outstanding amounts availed by Karvy under the facility agreement, according to the court documents filed with SAT.
However, the lenders were unable to get relief from SAT and Sebi. This led ICICI Bank to approach DRT for recovery of its loan amount by taking possession of the collateral, especially as its call to repay outstanding amounts was not honoured by Karvy.
On 31 December the Karvy Group had announced its restructuring plans and bifurcating the group into two verticals - financial services and non-financial services.
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