Axis Bank Ltd. vs Sebi

1. The appellant has filed the appeal in the capacity of the

Professional Clearing Member who cleared the trading of Modex

International Securities Ltd. (Respondent No. 2) who is a trading

member. The appellant was aggrieved by the orders dated May 28,

2020 and June 8, 2020 issued by the National Stock Exchange of

India Ltd. - Respondent No. 5 (hereinafter referred to as „NSE‟)

directing the appellant to release certain securities which were held

as security for the trading of Respondent No. 2. The contention of

the appellant was that the directions issued by NSE were wholly

illegal and arbitrary and that the appellant could not be directed to

release certain securities for which the appellant was the true actual

owner since it had been legally transferred to its account.

2. By our order dated June 19, 2020, we issued the following

directions :-

"a) The parties shall appear before NSE, either physically or through Video Conference, on June 24, 2020. NSE shall give the contact details and arrangements for the said meeting to the parties atleast one day in advance.

4 b) Based on the database of NSE and other parties rights in respect of the securities in question shall be reconciled/determined within one week thereafter.

c) This Tribunal will hear the matter further on Friday, July 03, 2020. In the interim status quo shall be maintained by the parties i.e. there shall be no transfer of securities as directed in the impugned orders nor the appellant shall alienate any of the securities in question."

3. Based on the aforesaid directions, NSE held a meeting on June

24, 2020 and again on June 29, 2020. Minutes of the meeting dated

June 29, 2020 has been annexed as „Exhibit D‟ to the Limited

Affidavit dated July 2, 2020 filed by the appellant.

4. The minutes of the meeting of June 29, 2020 of NSE

(Exhibit D) has not been disputed by the Mr. Venkatesh Dhond, the

learned senior counsel for NSE. The relevant minutes of the meeting

dated June 29, 2020 are extracted hereunder :-

"1. All parties have understood that reconciled list of securities/ISIN, shared by Modex and forwarded by NSE to all parties vide email dated June 27, 2020, consists of details of securities available with Axis Bank (Clearing Member) duly bifurcated between i) securities required to be transferred to zero/credit and debit clients in excess of their debits balance (column D), ii) securities related to PRO 5

(column E) and iii) securities related to debit clients to the extent to their debit balance (column G).

2. It was confirmed in the meeting by Modex and NSE that the securities mentioned in Column G entirely represents the debit balance clients.

3. It has been decided that Axis Bank may appropriate the securities listed in the column E and G i.e. Securities related to PRO and Securities related to debit clients to the extent to their debit balance to recover their dues towards obligation."

5. A perusal of the aforesaid minutes indicates that the securities

were reconciled and it was decided that the appellant can appropriate

the securities listed in column E and G.

6. In the light of the aforesaid, we have heard Shri Gaurav Joshi,

the learned senior counsel alongwith Mr. Neville Lashkari,

Mr. Chaitanya D. Mehta, Ms. Sonali Aggarwal and Mr. Bhanu

Chopra, the learned counsel for the appellant and Shri Venkatesh

Dhond, the learned senior counsel for NSE and Mr. Nimay Dave, the

learned counsel for the respondent No. 2 and Mr. Rafique Dada, the

learned senior counsel alongwith Mr. Anubhav Ghosh, the learned

counsel for SEBI through video conference. 6

7. The learned senior counsel for the appellant contended that

without prejudice to their rights on the issues raised in the appeal, the

appellant is willing to appropriate the securities mentioned in column

E and G and the appeal could be disposed of on that front leaving the

issues to remain open. Mr. Nimay Dave, the learned counsel for the

respondent No. 2 contended that the appellant may be allowed to sell

the securities first which are shown in column G and, thereafter if

there is a shortfall, the securities mentioned in column E may be sold

with the further stipulation that the shares of Modex may be sold as a

last resort. This contention was vehemently opposed by the learned

senior counsel for the appellant who contended that they have a right

to sell any scrip and the choice is not left in the hands of the

respondent no. 2 who is a defaulter. Shri Dada, the learned senior

counsel alongwith Shri Anubhav Ghosh contended that the surplus

shares depicted in a column E and G should be sold in a time bound

manner and only to extent of the recovery of Rs. 21.61 crores and

the surplus, if any, should be given back to the clients by the

appellants. It was also contended that the securities mentioned in

column D should be released forthwith by the appellant. The learned

senior counsel Mr. Venkatesh Dhond for NSE also contended that

the securities shown in column D should be released at the earliest by

the appellant.

7

8. After hearing the learned senior counsel for the parties at

some length, we dispose of the appeal at the admission stage in the

following manner, without calling for a reply, leaving all grounds

raised by the appellant open to be questioned if required at an

appropriate stage :-

1. Securities mentioned in column E and G in the minutes

dated June 29, 2020 („Exhibit D‟) to the limited affidavit

may be sold by the appellant for the purpose of recovery of

their dues amounting to Rs. 21.61 crores within one month

from today.

2. After recovery of Rs. 21.61 crores, the surplus, if any,

would be returned to the clients immediately thereafter.

3. Securities shown in column D to the minutes of the meeting

dated June 29, 2020 (Exhibit D) to the limited affidavit shall

be released by the appellant within a week from today.

9. In the circumstances of the case, there shall be no order as to

costs.

10. The present matter was heard through video conference due

to Covid-19 pandemic. At this stage it is not possible to sign a copy 8

of this order nor a certified copy of this order could be issued by the

Registry. In these circumstances, this order will be digitally signed

by the Presiding Officer on behalf of the bench and all concerned

parties are directed to act on the digitally signed copy of this order.

Parties will act on production of a digitally signed copy sent by fax

and/or email.

Digitally signed by TARUN

TARUN AGARWAL DN: c=IN, st=Uttar Pradesh, 2.5.4.20=a0e08b2d80e9d23c2c 2aa3e16780d684adad6bc9e81 0de2d7b0c28efd35557c9,

AGAR postalCode=211001, street=B/ A,NYAYA MARG ALLAHABAD, serialNumber=095f8b286bb0b 1cd07ff676611f4f5e7999727d4 Justice Tarun Agarwala WAL 04aa38ca422f9d3529bdb8a3, o=Personal, cn=TARUN AGARWAL Date: 2020.07.03 19:38:43 +05'30' Presiding Officer

Dr. C. K. G. Nair Member

Justice M. T. Joshi Judicial Member 03.07.2020 PTM