SAT imposes ₹5 lakh costs on SEBI for failing to de-freeze Kirloskar family demat accounts despite orders

The Securities Appellate Tribunal (SAT) on Monday came down heavily on the Securities and Exchange Board of India (SEBI) for failing to de-freeze the demat accounts of five members of the Kirloskar family despite being ordered to do so last year..A coram of Presiding Officer Justice Tarun Agarwala and Technical Member Meera Swarup directed SEBI to deposit costs of ₹5 lakh with the SAT Registry for its "lackadaisical approach" in the matter."...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 order stated..SEBI had passed an order in October 2020 barring Atul, Rahul, Alpana and Arti Kirloskar as well as Jyotsna Kulkarni (appellants) from accessing the securities market for a period of six months. The appellants then approached the SAT in appeal, which stayed the order in December that year, subject to an undertaking to the effect that they would not sell their shares in Kirloskar Industries Limited (KIL). Consequently, their demat accounts were de-freezed except to the extent of the shares held by them in KIL.In October 2022, SAT made its earlier interim order final by quashing the SEBI order of October 2020. Despite this, the appellants’ shares in KIL remained frozen..The Kirloskars then wrote to the National Securities Depository Limited (NSDL) asking it to unfreeze the shares held by them in KIL. When NSDL asked SEBI for guidance on the issue, they allegedly received no response. This prompted the Kirloskars to move the SAT again this year.SEBI argued that it had sent an email to NSDL asking it to de-freeze the accounts. However, NSDL later contended that it could not do so as the Permanent Account Numbers (PAN) of the appellants were not provided. .Even as SEBI and NSDL both claimed that the other had not complied with the SAT order, the Appellate Tribunal took a dim view of the "blame game" between the two entities. It went on to hold,"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.".Advocates Kunal Katariya and Tushar Ajinkya appeared for the Kirloskars. Advocate Sukanya Sehgal represented another related applicant.SEBI was represented by Senior Advocate Pradeep Sancheti, who was briefed by a team from K Ashar & Co comprising Advocates Mihir Mody, Arnav Misra and Harshvardhan Melanta.Senior Advocate Gaurav Joshi, briefed by Advocates Abishek Venkataraman, Pulkit Sukhramani, Vidhi Jhawar, Deepank Anand and Shourya Tanay of J Sagar Associates, appeared for NSDL..[Read order]