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2020 (1) TMI 708 - AT - SEBIPledging of client securities by Karvy by allegedly misutilizing the power of attorney granted by the clients - account frozen explicitly by the WTM of SEBI - appeal filed by Karvy before this Tribunal seeking flexibility in using the power of attorney - maintainability of the appeal - HELD THAT:- 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 party is clearly undisputed. It is also a fact that the appellant was not heard either by SEBI or by the Exchanges or Depositories before passing the impugned directions. Though, the account frozen explicitly by the WTM of SEBI by order dated November 22, 2019 is not the same account as that of the appellant implicitly the order has got extended to such accounts because of the sweeping nature of the WTM’s directions to protect the interest of the investors. Hence the action by Respondent No. 3 NSDL is also a consequential one as clearly stated in their communication. Though appellant seeks to suggest a solution stating that some of the investors in fact owe dues to Karvy and hence securities to the extent of such dues rightly belonging to Karvy at least could be used by the appellant to invoke the pledge so that at least part of the funds would be available to the appellant. We are not in a position to ascertain the veracity of the information as provided by Karvy to the appellant. Therefore, we direct the appellant to file an appropriate representation before SEBI. If such an application is filed SEBI will hear the appellant and other relevant entities and pass appropriate directions within 15 days from the date of this order. In the interim status quo shall be maintained in respect of the securities in Account No. 19502787 named “Karvy Stock Broking Limited- Client Account-NSE CM”.
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