SAT stays Sebi's notices issued to BSE, NSE in Karvy Stock Broking case

The Securities Appellate Tribunal (SAT) on Thursday stayed Sebi's demand notices issued to exchanges, BSE and NSE, in a case related to Karvy Stock Broking Ltd (KSBL), whereby they had to pay Rs 5 cr

The Securities Appellate Tribunal (SAT) on Thursday stayed Sebi's demand notices issued to stock exchanges, BSE and NSE, in a case related to Karvy Stock Broking Ltd (KSBL), whereby the regulator had asked them to pay over Rs 5 crore within 15 days.

In its order, the appellate tribunal observed that these appeals were listed for admission on June 14, on which date the matters were adjourned for June 21, and an oral direction was given to Sebi that no recovery should be made till that date.

"Inspite of the oral direction of this Tribunal, it transpires that a demand notice has been issued. It is unfortunate, that inspite of an oral direction, a demand notice has been issued on June 15, 2022 by the Recovery Officer," SAT said.

Accordingly, SAT directed that no recovery will be made from the appellants till the next date of listing.

"The demand notice dated June 15, 2022 is stayed and no recovery shall be made till the next date of listing," it added.

On Wednesday, Sebi sent notices to stock exchanges in a case related to KSBL and warned of attachment of assets and bank accounts if they fail to make the payment within 15 days.

In two separate notices, Sebi directed BSE and NSE to pay Rs 3.09 crore and Rs 2.06 crore, respectively, along with further interest, all cost, charges and expenses within 15 days.

This amount includes penalty, interest from April 12 till date, and recovery cost.

In the event of non-payment of dues, the markets regulator will recover the amount by attaching and selling the exchanges' moveable and immoveable properties. Besides, the bourses face attachment of their bank accounts.

Also, the regulator can take the route of arrest and detention in prison to recover the amount.

The notices came after the exchanges failed to pay the fine imposed on them by the Securities and Exchange Board of India (Sebi).

In an order on April 12, Sebi had slapped a penalty of Rs 3 crore on BSE and Rs 2 crore on NSE for "laxity" on their part in detecting misuse of clients' securities by KSBL.

The matter relates to misutilisation of client securities worth Rs 2,300 crore by KSBL, belonging to more than 95,000 clients, by pledging them from just one demat account. The funds raised against the pledge were used by KSBL for itself and its group entities.

KSBL and its group entities utilised this money for raising Rs 851.43 crore from eight banks/Non-Banking Financial Companies (NBFCs).