SAT hauls up Sebi for lackadaisical approach in Kirloskar Industries case

New Delhi: The Securities Appellate Tribunal (SAT) on Monday pulled up markets regulator Sebi for failing to de-freeze the shares held by members of the Kirloskar family in Kirloskar Industries Ltd (KIL) despite the tribunal's directive. It asked Sebi to deposit costs of Rs 5 lakh before the tribunal's registry for its "lackadaisical approach" in the case.

"We are of the opinion that this lackadaisical approach by Sebi is contrary to the spirit of the Sebi Act, which in our opinion is to protect the interest of the investors. In the instant case, we find that the interest of the investors, namely, the appellants was least considered and apathy was writ large," a bench of Presiding Officer Justice Tarun Agarwala, and Technical Member Meera Swarup said in the order.

In October 2020, Sebi prohibited Atul Kirloskar, Rahul Kirloskar, Alpana Kirloskar, Arti Kirloskar, and Jyotsna Kulkarni from accessing the securities market for six months.

This order was challenged in the appellate tribunal, which passed in the interim of December 2020 and stayed Sebi's order subject to an undertaking to the effect that they would not sell their shares in KIL.

Accordingly, the demat accounts of these five appellants were de-freezed except to the extent of the shares held by them in KIL.

In October last year, SAT passed a final order and set aside Sebi's order in October 2020.

Despite this, the appellants' shares in KIL remained frozen, SAT noted.

The appellants wrote an email in February this year to Sebi asking the National Securities Depository Limited (NSDL) to be directed to unfreeze the shares held by them in KIL. Also, they wrote to NSDL requesting NSDL to unfreeze the shares.

In the succeeding month, NSDL asked for directions from Sebi and the depository alleged that it did not receive any response from the regulator on its query.

On August 8, 2023, the appellants again wrote to the NSDL with the same request, which allegedly remained unanswered.

This prompted the Kirloskars to move the SAT again this year.

Then Sebi in its reply responded by saying that they had instructed NSDL in an email dated December 13, 2022, to comply with the SAT order.

It further said the default was not on Sebi's part and that the NSDL was responsible for refreezing the shares.

Further, NSDL in its response to SAT said they could not take any action on Sebi's email because the Permanent Account Number (PAN) of the appellants was not provided.

Also, NSDL submitted that it had approached Sebi for guidance, through an email on March 13, 2023, and that the regulator had not responded to that query.

Sebi contended that the NSDL had sent this letter to the wrong person and therefore the query went unattended.

"We find that a blame game has started between Sebi and NSDL. Both entities are blaming each other for non-compliance of SAT order," the tribunal noted.

"The net result is that there is apathy on the part of Sebi in not taking follow-up action," it added.