Appellant to Seek NCL Annulment & SEBI Account Freeze Upheld

The Tribunal directed the appellant to approach NCL for annulment of trades and upheld SEBI's direction regarding the freezing of the demat account. The Tribunal clarified that the appellant had locus standi to seek modification of SEBI's ex-parte interim order and should be heard by SEBI.

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Issues Involved:
1. Annulment of trades.
2. Freezing of demat accounts.
3. Locus standi of the appellant for modification of ex-parte interim order.

Issue-wise Detailed Analysis:

1. Annulment of Trades:
The appellant, a clearing member empanelled with NCL, sought annulment of trades executed by Allied, a stockbroker and member of NSE. Allied had provided margins to the appellant through mutual funds and cash, which were later found to be involved in fraudulent activities. SEBI, in its order dated March 29, 2019, stated that the appellant had no locus standi to apply for annulment of trades and directed them to approach the Stock Exchange as per SEBI's Circular dated July 16, 2015. However, the Tribunal found that SEBI has wide powers under Section 11 and 11B of the SEBI Act, 1992, and Section 12A of the SCRA, 1956, to consider annulment requests. The Tribunal noted that the appellant, being a clearing member, could not apply under the Stock Exchange bye-laws but could apply under the NCL bye-laws. The relevant authority for such annulment would be the Board of Directors of NCL and SEBI. The Tribunal directed the appellant to file an application under Clause 5 of Chapter VII of NCL bye-laws for annulment of trades.

2. Freezing of Demat Accounts:
The appellant's demat account was frozen by the Economic Offence Wing (EOW) due to allegations of fraudulent transfer of mutual funds by Allied. SEBI directed the appellant to approach EOW for any relief regarding the freezing of the demat account. The Tribunal upheld SEBI's direction, noting that the appellant was already pursuing the matter before the Delhi High Court and that SEBI could not pass any order in this regard.

3. Locus Standi of the Appellant for Modification of Ex-parte Interim Order:
SEBI's ex-parte interim order dated February 27, 2019, restrained Allied from accessing the securities market and froze their assets. The appellant contended that they were affected by this order and sought its modification. SEBI held that the appellant had no locus standi as they were not a noticee in the interim order. The Tribunal found this to be erroneous, stating that the appellant, being directly or indirectly affected by the order, had the right to apply for its modification. The Tribunal emphasized that the appellant should be given an opportunity to be heard by SEBI for the protection of its interests.

Conclusion:
The Tribunal disposed of the matter, directing the appellant to approach NCL for annulment of trades and upheld SEBI's direction regarding the freezing of the demat account. The Tribunal also clarified that the appellant had locus standi to seek modification of SEBI's ex-parte interim order and should be heard by SEBI.

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