TMI Blog2020 (1) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... assing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mediate effect; (iii) The Depositories shall monitor the movement of securities into and from the DP account of clients of KSBL as DP to ensure that clients operations are not affected; (iv) The Depositories shall not allow transfer of securities from DP account no. 11458979, named 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. Further a number of lenders who were impacted by the order dated November 22, 2019, particularly direction no. (iv) in paragraph 21 of the said order approa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investors, whose shares have been pledged. Accordingly, based on the information provided by NSE, such client securities that appear to be pledged are therefore under a state of abeyance. 5. It is the submission of the leaned Senior Counsel that the pledged account namely Karvy Stock Broking Limited- Client Account-NSE CM is clearly a client account but it is factually on record that this is an account of the client securities where the clients have outstanding obligations towards Karvy and as such Karvy has legitimately pledged those securities and borrowed funds from the appellant. Voluminous data was also produced to prove this contention wherein client wise details of the number and value of securities, outstanding obligation of each client and the value of pledge etc. are given. Further, this was not a secret account like DP Account No. 11458979, named KARVY STOCK BROKING LTD (BSE) and it was always under the supervision of the Depositories and Exchange who are respondents in this appeal. Therefore, it was contended that, in the absence of an explicit direction from SEBI, NSDL could not have frozen the account or kept the rights of the appellant in abeyance by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . Therefore, the appellant wrote to SEBI on October 03, 2019, after the expiry of the said three months transition time provided by the June 20, 2019 Circular, seeking advice as to whether Karvy could be permitted three more months time to unpledge the shares pledged with them. It was further submitted that Karvy in turn proposed to the appellant a swapping arrangement of collaterals provided against credit facilities availed by Karvy which the appellant did not accept due to their own commercial consideration. 9. The learned Senior Counsel for SEBI further submitted that a Forensic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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