[ By Bobby Anthony ]ICICI Bank, Bajaj Finance Ltd, HDFC Bank, IndusInd Bank, Axis and other lenders banks which had lent to Karvy Stock Broking Ltd have begun exploring other avenues after failing to secure any relief from the Securities and Exchange Board of India (SEBI) on shares of its clients, which was pledged by the brokerage.Karvy’s lenders plan to file petitions with the Debt...
ICICI Bank, Bajaj Finance Ltd, HDFC Bank, IndusInd Bank, Axis and other lenders banks which had lent to Karvy Stock Broking Ltd have begun exploring other avenues after failing to secure any relief from the Securities and Exchange Board of India (SEBI) on shares of its clients, which was pledged by the brokerage.
Karvy’s lenders plan to file petitions with the Debt Recovery Tribunal (DRT) as well as the Insolvency and Bankruptcy Board of India (IBBI), besides selling minority stakes in sister concerns belonging to the brokerage.
Incidentally, a total of seven entities have lent more than Rs 1,400 crore to Karvy against share collateral worth Rs 2,319 crore.
On November 22, SEBI had barred Karvy from acquiring new clients and from using power of attorney, thereby preventing the company from trading on behalf of clients, after the broker allegedly transferred clients’ money for other purposes and indulged in trades that were not authorized by them.
Instead of pledging its own shares, Karvy had pledged shares belonging to clients and used them to raise funds, which were transferred to its sister concerns like Karvy Realty Ltd later.
On December 20, ICICI Bank Ltd became the first lender to approach the Hyderabad DRT for recovery of dues.
Meanwhile, SEBI is slated to decide on Axis Bank’s plea seeking ownership of pledged shares by January 15. However, SEBI is unlikely to deliver a verdict that would vary from its December 13 order which was issued after a representation by other lenders.
In its December 13 order, SEBI had observed that all shares of clients pledged by Karvy came from accounts of its clients and lenders did not exercise proper “due diligence".
Incidentally, Karvy stands accused of misusing client securities worth Rs 2,800 crore to secure loan facilities from lenders towards meeting working capital needs. The brokerage has also been accused of selling off shares belonging to its clients and transferring the proceeds to its real estate group company.