TaxTMI 
TaxTMI 
2020 (1) TMI 708
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..... for the Appellant. Mr. Rafique Dada, Senior Advocate with Mr. Anubhav Ghosh and Ms. Rashi Dalmia, Mr. KRCV Seshachalam, Advocate with Ms. Sabeena Mahadik and Mr. Aayush Kothari, Mr. Somasekhar Sundaresan, Advocate with Mr. Rohan Dakshini, Ms. Aakanksha Saxena, Ms. Kinjal Shah and Ms. E. Srivastava, Mr. Somasekhar Sundaresan, Advocate with Ms. Shruti Rajan, Mr. Aditya Sikka and Mr. Pratham Masurekar, Advocates i/b Cyril Amarchand Mangaldas for Respondent. JUDGMENT Dr. C.K.G. Nair 1. This appeal has been filed aggrieved by the communication dated November 23, 2019 issued by the National Securities Depository Limited ("NSDL" for convenience), Respondent No. 3 whereby preventing the appellant from accessing the securities p....
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....ed KARVY STOCK BROKING LTD (BSE) with immediate effect. The transfer of securities from DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE) shall be permitted only to the respective beneficial owner who has paid in full against these securities, under supervision of NSE; and (v) The Depositories and Stock Exchanges shall initiate appropriate disciplinary regulatory proceedings against the Noticee for misuse of clients' funds and securities as per their respective bye laws, rules and regulations;............." Thereafter, an appeal filed by Karvy before this Tribunal seeking flexibility in using the power of attorney was remanded to SEBI which was disposed of by the WTM of SEBI by order dated November 29, 2019. Fu....
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....ding loans/ funds against pledged securities. 4. Shri Gaurav Joshi, learned Senior Counsel appearing on behalf of the appellant submits that the ex-parte ad-interim order dated November 22, 2019 passed by the WTM of SEBI did not contain any direction preventing the appellant from operating Demat Account No. 19502787 which is named "Karvy Stock Broking Limited- Client Account-NSE CM". Because vide direction contained in para 21(iv) of the said order restriction was imposed only on DP Account No. 11458979, named KARVY STOCK BROKING LTD (BSE). Therefore, other DP Account Numbers of Karvy including Account No. 19502787 was not under any restrictions. However, by the impugned communication, Respondent No. 3, NSDL has kept the said acco....
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....eyance by the impugned communication. 6. The learned Senior Counsel further contended that under the provisions of the Depositories Act, 1996 the pledgee has rights over the securities pledged and such rights could not be arbitrarily kept in abeyance or extinguished without following due process and in the instant case the appellant was not even given an opportunity of being heard by either NSDL or SEBI or any other respondents herein. Accordingly, appellant seeks reliefs as under:- a) Quashing of the communication dated November 23, 2019 and as well as the orders passed by the WTM of SEBI dated November 22, 2019 and November 29, 2019, if the later two orders are interpreted to cover the securities in Client ID No. 195027....
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....given to KSBL by its clients, with immediate effect." 8. Learned Senior Counsel Shri Rafique Dada, representing Respondent No. 1, SEBI submits that the appellant was aware of the Circulars issued by SEBI in relation to treatment of clients' securities etc. The Circular dated June 20, 2019 regarding handling of clients' securities by trading members/ clearing members had categorically stated that under no circumstances the trading members like Karvy could have pledged clients' securities beyond September 30, 2019. Clause 4.8 of the Circular makes it very clear that the securities pledged shall "either be unpledged and returned to the clients upon fulfillment of pay-in obligation or disposed off after giving notice of 5 days to the client"....
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....y are allowed to operate their accounts and transfer the securities rightly belonging to them they will be able to pay up their dues towards the appellant. 11. Having heard the learned counsel for the parties, and having perused the documents, we are of the view that the preliminary objection regarding maintainability of the appeal is not sustainable since the appellant is an affected party impacted by all the impugned communications/ orders together which the appeal is also challenging. It is a fact that the appellant as a bank has lent funds to Karvy under a permitted Loan against Shares arrangement and under the Depositories Act, rights and sanctity are provided to such pledged accounts. Therefore, the appellant is an affected p....