SAT slaps Rs. 5 Lakh fine on SEBI for failure to unfreeze Shares of Kirloskars [Read Order]
SEBI – SAT slaps – unfreeze Shares – TAXSCAN
SEBI – SAT slaps – unfreeze Shares – TAXSCAN
The Mumbai Bench of the Securities Appellate Tribunal (SAT) strongly rebuked the Securities and Exchange Board of India (SEBI) for its failure to adhere to the previous directive to unfreeze the demat accounts of five members of the Kirloskar family, issued last year.
Presiding Officer Justice Tarun Agarwala and Technical Member Meera Swarup, constituting the Coram, instructed SEBI to remit a penalty of ₹5 lakh to the SAT Registry, citing its "negligent handling" of the situation.
The Coram opined that SEBI's lackadaisical approach goes against the spirit of the SEBI Act, which is designed to safeguard the interests of investors. In this instance, the Coram noted a disregard for the interests of the appellants (investors) and a clear apathy on the part of SEBI.
In October 2020, SEBI issued an order restraining Atul, Rahul, Alpana, Arti Kirloskar, and Jyotsna Kulkarni (appellants) from participating in the securities market for six months. The appellants contested this order, resulting in an interim order in December 2020 that suspended the effects of SEBI's order, with the condition that they refrain from selling shares of Kirloskar Industries Limited (KIL).
Following the interim order, their demat accounts were unfrozen, except for the KIL shares, which remained frozen per the Tribunal's directive.
In October 2022, SAT invalidated SEBI's October 2020 order. However, the KIL shares of the appellants remained frozen. Subsequently, the Kirloskars approached the National Securities Depository Limited (NSDL) to unfreeze their KIL shares. NSDL sought guidance from SEBI but received no response. Consequently, the Kirloskars returned to SAT this year.
SEBI contended that it had sent NSDL instructions via email to unfreeze the accounts. However, NSDL argued that it couldn't comply due to the absence of Permanent Account Numbers (PAN) for the appellants.
Despite the back-and-forth between SEBI and NSDL, the Appellate Tribunal disapproved, asserting that SEBI should have been more diligent in ensuring compliance with the Tribunal's orders. The Coram concluded by directing SEBI to pay a Rs. 5 lakh cost within two weeks and suggested that if SEBI finds fault with NSDL, it should take appropriate remedial measures against them.
To Read the full text of the Order CLICK HERE
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