SAT Criticizes SEBI For Negligence in Unfreezing Kirloskar Family Demat Accounts Despite Orders; Imposes ₹5 Lakh Costs

On Monday, the Securities Appellate Tribunal (SAT) strongly criticized the Securities and Exchange Board of India (SEBI) for its failure to unfreeze the demat accounts of five Kirloskar family members, despite a previous order to do so last year.Presiding Officer Justice Tarun Agarwala and Technical Member Meera Swarup, constituting the Coram, instructed SEBI to pay a penalty of ₹5 lakh to the SAT Registry as a consequence of its "negligent handling" of the situation.“Considering the aforesaid, 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 were least considered and apathy was writ large," the Coram opined.SEBI had passed an order in October 2020 restraining the applicants i.e., Atul, Rahul, Alpana and Arti Kirloskar as well as Jyotsna Kulkarni (appellants) from accessing the securities market for a period of six months.The said order was then challenged by applicants as they approached the SAT in appeal. An interim order was passed in December 2020 staying the effect and operation of the SEBI's order subject to an undertaking to be provided by the appellants to the effect that they would not sell the shares of Kirloskar Industries Limited (KIL).Thereafter, in terms of the interim order, their demat accountswere defreezed except to the extent of the shares held by the appellants in KIL which remained frozen pursuant to the Tribunal's orderIn October 2022, the SAT finalized its earlier interim order by nullifying the SEBI order issued in October 2020. Despite this decision, the shares of the appellants in KIL remained frozen.Subsequently, the Kirloskars wrote to the National Securities Depository Limited (NSDL), requesting the unfreezing of their shares in KIL. When NSDL sought guidance from SEBI on the matter, they reportedly received no response. This led the Kirloskars to approach the SAT again this year.SEBI contended that it had sent an email to NSDL instructing the unfreezing of the accounts. However, NSDL later argued that it couldn't comply as the Permanent Account Numbers (PAN) of the appellants were not provided.Despite both SEBI and NSDL claiming that the other failed to adhere to the SAT order, the Appellate Tribunal disapproved of the "blame game" between the two entities.The Corum held, "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 inspite of their appeals have been allowed.”“Consequently, we dispose of the Misc. Applications directing the SEBI to pay cost of Rs. 5 lakhs to be deposited before the Registrar of this Tribunal within two weeks from today. In the event, SEBI finds that the fault lay with NSDL it will be open to them to take appropriate remedial measures against NSDL,” the Coram concluded.Case Title: Alpana R. Kirloskar & Ors vs. Securities and Exchange Board of India and Anr Case No.: Misc. Application No. 1436 of 2023Click Here To Read / Download Judgement

SAT Criticizes SEBI For Negligence in Unfreezing Kirloskar Family Demat Accounts Despite Orders; Imposes ₹5 Lakh Costs

Bhavya Singh

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