2020 (2) TMI 436

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.... the Respondent. ORDER Dr. C.K.G. Nair, These three appeals have been filed challenging the ex-parte ad interim order dated November 22, 2019 passed by the Whole Time Member ('WTM' for short) of the Securities and Exchange Board of India ('SEBI' for short) in the matter of M/s. Karvy Stock Broking Ltd. ('Karvy' for short). Since all these appeals challenge the same impugned order and the basic issues are common, by consent of the parties, all these appeals are heard together and disposed of by this common decision. 2. Appellants are banks who lent varying amounts of money to Karvy on the basis of pledged securities. The issues covered in these appeals are the same as in the matter of Bajaj Finance Ltd v. ....

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....all other activities relating to transfer of securities as contained in direction no. (iv) quoted above should have waited for the completion of forensic audit and exact determination of rights of the parties. It was also argued that the second sentence in direction no. (iv) was only an advisory and not a direction and hence NSDL should not have transferred the securities back to the clients accounts. Therefore, transferring the securities, while a forensic audit is pending, and through an ex parte ad interim order is a clear over reach by the Respondents SEBI, NSDL and NSE and beyond the provisions of law. 4. We have heard the learned Senior Counsel and Counsel appearing for the three Appellants as well as for the four Respondents. The ....

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....d pledge and the rights of such pledgees those securities could not have been alienated without full determination of facts and ownership rights through an ex parte ad interim order. It was also contended that the transfer of securities back to the clients has been done when the matter was pending before this Tribunal, pre-empting the Tribunal action. 5. Learned Senior Counsel representing Respondent No. 1, SEBI contended that the June 20, 2019 circular of SEBI clearly emphasized that the clients' securities could not be pledged by the brokers and an elaborate mechanism was provided for ring fencing the clients' securities and funds and these directions had to be implemented latest by August 31, 2019. Therefore, it was incumbent ....

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....he directions passed in our order of Bajaj Finance Ltd. (supra) no further relief can be granted at this stage. We have no dispute with the interpretations of the provisions of the Depositories Act and Regulations thereunder. However, while dealing with a case of alleged fraud the implications of the same have to be factored in. The very purpose of an ex parte ad interim order is to deal with the eventualities arising from such alleged fraud or similar major violations. This ex parte ad interim order was issued on November 22, 2019. Even an oral mentioning was made by the Appellants before this Tribunal only on December 2, 2019 by which time a lot of water has flown under the bridge. Now it is on record before us that after a due diligence ....