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SAT directs SEBI to pay Rs 5 lakh costs over ‘lackadaisical approach’ in not defreezing shares of Kirloskars
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MUMBAI: Reprimanding Securities and Exchange Board of India (SEBI), the Securities Appellate Tribunal (SAT) on Monday directed the markets regulator to pay a cost of Rs 5 lakh within two weeks before its registrar. The Tribunal pulled up SEBI for its “lackadaisical approach’’ in failing to defreeze the shares of five members of the Kirloskar family despite its December 2022 order in quashing an October 2020 order of SEBI restraining them from accessing the securities market for six months.
The SAT Mumbai bench observed that the SEBI’s approach was “contrary to the spirit of the SEBI Act which in our opinion is to protect the interest of the investors.”
“We find that the interest of the investors, namely, the appellants were least considered and apathy was writ large,” said Justice Tarun Agarwala, presiding officer and Meera Swarup, technical member in the order.
The Tribunal also said it was only when Kirloskars filed the plea on November 1, 2023 before it that “all hell broke loose and the demat accounts and the shares of the appellants were defreezed on November 03, 2023.’’ “ This by itself speaks volumes of the functioning of SEBI in reacting to matters at the last moment,’’ said SAT, observing a “blame game’’ between SEBI and NSDL.
The SEBI in 2020 in the matter relating to Kirloskar Brothers Limited had restrained Alpana Kirloskar, Arti Kirloskar, Jyotsna Kirloskar, Rahul Kirloskar and Atul Kirloskar from temporarily accessing the securities market. They challenged the order. On December 24, 2020 the SAT granted them interim relief by staying SEBI’s order subject to their undertaking not to sell shares of Kirloskar Industries Ltd.
On October 12, 2022, SAT quashed the SEBI’s 2020 order. But despite succeeding in the appeal their shares in KIL remained frozen. In February, Kirloskars asked SEBI to direct National Securities Depository Ltd (NSDL) to unfreeze the shares. They also wrote to NSDL. The NSDL sought details from SEBI.
NSDL alleged it received no response from SEBI. Kirloskars again in August wrote to NSDL and said their request remained unaddressed leading them to file a plea before SAT for relief.
SEBI said it did not default as it had on December 13, 2022 instructed NSDL to comply with the SAT order. It said NSDL was responsible for not defreezing the shares.
NSDL said it could not act on SEBI’s email since PAN number was not provided and said despite seeking ‘guidance from SEBI’ via an email sent on March 13, 2023, it received no response. SEBI, in turn, said the email “remained unattended’’ since it was marked to a “wrong person.’’
“Both the entities are blaming each other for noncompliance of SAT order,’’ said Justice Agarwala but added, “net result is, that there is apathy on the part of SEBI in not taking follow up action.’’
“SEBI should have been more diligent in ensuring compliance of the orders of this Tribunal and by taking a lackadaisical approach the interest of the investors suffered. For more than a year the appellants’ shares remained frozen in spite of their appeals having been allowed,’’ said the tribunal, but added if SEB finds that NSDL was at fault it was free to take remedial action against NSDL.
The SAT Mumbai bench observed that the SEBI’s approach was “contrary to the spirit of the SEBI Act which in our opinion is to protect the interest of the investors.”
“We find that the interest of the investors, namely, the appellants were least considered and apathy was writ large,” said Justice Tarun Agarwala, presiding officer and Meera Swarup, technical member in the order.
The Tribunal also said it was only when Kirloskars filed the plea on November 1, 2023 before it that “all hell broke loose and the demat accounts and the shares of the appellants were defreezed on November 03, 2023.’’ “ This by itself speaks volumes of the functioning of SEBI in reacting to matters at the last moment,’’ said SAT, observing a “blame game’’ between SEBI and NSDL.
The SEBI in 2020 in the matter relating to Kirloskar Brothers Limited had restrained Alpana Kirloskar, Arti Kirloskar, Jyotsna Kirloskar, Rahul Kirloskar and Atul Kirloskar from temporarily accessing the securities market. They challenged the order. On December 24, 2020 the SAT granted them interim relief by staying SEBI’s order subject to their undertaking not to sell shares of Kirloskar Industries Ltd.
On October 12, 2022, SAT quashed the SEBI’s 2020 order. But despite succeeding in the appeal their shares in KIL remained frozen. In February, Kirloskars asked SEBI to direct National Securities Depository Ltd (NSDL) to unfreeze the shares. They also wrote to NSDL. The NSDL sought details from SEBI.
NSDL alleged it received no response from SEBI. Kirloskars again in August wrote to NSDL and said their request remained unaddressed leading them to file a plea before SAT for relief.
SEBI said it did not default as it had on December 13, 2022 instructed NSDL to comply with the SAT order. It said NSDL was responsible for not defreezing the shares.
NSDL said it could not act on SEBI’s email since PAN number was not provided and said despite seeking ‘guidance from SEBI’ via an email sent on March 13, 2023, it received no response. SEBI, in turn, said the email “remained unattended’’ since it was marked to a “wrong person.’’
“Both the entities are blaming each other for noncompliance of SAT order,’’ said Justice Agarwala but added, “net result is, that there is apathy on the part of SEBI in not taking follow up action.’’
“SEBI should have been more diligent in ensuring compliance of the orders of this Tribunal and by taking a lackadaisical approach the interest of the investors suffered. For more than a year the appellants’ shares remained frozen in spite of their appeals having been allowed,’’ said the tribunal, but added if SEB finds that NSDL was at fault it was free to take remedial action against NSDL.
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