On December 4, the Securities Appellate Tribunal denied any immediate relief to top lenders who had petitioned against the transfer of securities held with Karvy Stock Broking Ltd (KSBL) back to the clients.
The tribunal had directed the four lenders to approach Sebi by December 6 and that Sebi pass an order.
"... reliefs sought by the represented are not tenable and the remedy for the representors lies against KSBL before civil court of competent jurisdiction," Sebi Whole Time Member Ananta Barua said in the order.
The representors are Bajaj Finance, ICICI Bank, HDFC Bank and IndusInd Bank.
The case pertains to the securities held by KSBL which were allegedly used by the brokerage for borrowing courtesy the power of attorneys that they had. The securities held by over 83,000 clients were given back to them.
The regulator noted that under no circumstances clients' securities received in payout can be retained by a stock broker beyond five trading days or can be used for any other purpose.
"In the absence of corresponding trade instruction, pledging of securities of such clients is also unauthorised and hence, in law not treated as valid pledge," the 29-page order issued late Friday said.
Sebi also quoted a part of the tribunal's order, dated December 4, which had said it was on record that NSE and NSDL transferred the securities to the clients' accounts after due diligence.
In this context, a prayer to recall the same or to retain the same as frozen accounts of those clients becomes untenable, the regulator said, quoting the tribunal's order.
On November 22, Sebi barred KSBL from taking new clients in respect of its stock broking activities and also prevented it from using the power of attorney (PoA) given by clients after the broker was found to have allegedly misused clients' securities. RAM ABM ABM