The Securities and Appellate Tribunal (SAT) on Wednesday refused any immediate relief to top lenders which had challenged the transfer of securities held with Karvy Stock Broking Ltd back to clients.
Private banks including ICICI Bank, HDFC Bank and IndusInd Bank had pleaded with SAT to either give the securities to them or place them in an escrow account to protect their funds. Using the power of attorney it had from clients, Karvy had pledged the shares to borrow.
Following a SEBI order on Monday, depository NSDL transferred the securities to Karvy’s clients. Bajaj Finance had moved SAT against NSDL’s move.
NSDL transferred the shares in Karvy’s account to 82,599 clients. Some 7,000 more clients are claiming their shares. The banks had also fought over the first charge of shares in Karvy’s demat account, lawyers said.
SAT asked the lenders to file a plea with SEBI by Friday and directed the regulator to pass a final order by December 12.
The lenders wanted SAT to quash SEBI’s November 22 order as it prevented them from accessing securities in Karvy’s demat account.
The banks argued that it was a common industry practice to lend against pledged shares, and there was no reason to suspect Karvy’s claim that it owned these shares. Karvy owes approximately ₹642 crore to ICICI Bank, ₹350 crore to HDFC Bank, ₹345 crore to Bajaj Finance and ₹132.5 crore to IndusInd Bank.