The Securities and Exchange Board of India (Sebi) and the National Stock Exchange of India have moved the Supreme Court in opposition to a sectoral tribunal order that quashed the market regulator’s order in opposition to HDFC Bank in a case regarding invoking securities pledged by stockbroker BRH Wealth Kreators.
A Bench led by Justice SA Nazeer will hear the matter on Monday.
The Securities Appellate Tribunal (SAT) had in February quashed the Sebi’s January 2021 order that had imposed a Rs 1 crore nice on the lender for flouting instructions handed in its interim order of October 2019. The regulator had additionally directed HDFC to switch Rs 158.68 crore with 7% curiosity every year into an escrow account until the difficulty of settlement of shoppers’ securities was reconciled.
SAT had held that HDFC Bank was justified in invoking the pledge made by BRH and in doing so, didn’t violate any Sebi instructions.
Sebi has informed the SC the SAT had failed to think about {that a} pledge created on the securities of buyers/ shoppers in favour of the financial institution was unhealthy in regulation and in opposition to the intent of the Depositories Act, 1996, and Sebi Act, 1992, and circulars issued underneath them.
In its enchantment, filed via counsel Pratap Venugopal, Sebi mentioned BRH had misappropriated its shoppers’ securities of Rs 169.24 crore in September 2019 and misutilised them by pledging them for grant of a mortgage of Rs 191.16 crore from the financial institution.
“Because in any event, the banks/ NBFCs as a pledgee of DMAT securities as well as a prospective transferee on invocation is a ‘person associated with the securities markets’. It cannot be said that the banks therefore are not within the jurisdiction of Sebi; any person dealing with securities, including a person dealing in the depository system by creating a pledge in his favour, is within the Sebi jurisdiction and bound by the Sebi orders,” it mentioned.
BRH had availed a mortgage in opposition to shares from HDFC Bank. The brokerage agency had in October 2019 defaulted on its obligations, following which the financial institution recalled a mortgage price Rs 191 crore. As BRH didn’t repay the mortgage, the financial institution offered shares pledged by the dealer price Rs 140 crore between October to December 2019. This was regardless of Sebi restraining BRH in October 2019 from accessing the securities market and disposing of its belongings.
Source: www.financialexpress.com”