SAT asks Axis bank, NSE to maintain status quo; to hear matter on July 3

The Securities Appellate Tribunal (SAT) has directed Axis Bank and National Stock Exchange to maintain status quo in a matter pertaining to release of certain securities by the private lender, directed by NSE.

The tribunal will hear the matter again on July 3, according to a SAT order.

The interim order came on an appeal by Axis Bank against a direction by the NSE to release certain securities.

Axis Bank filed the appeal in the capacity of a professional clearing member who cleared the trading of Modex International Securities Ltd.

Axis bank contended that orders passed by NSE are "illegal and arbitrary" as it directs it to release certain securities for which the lender is the actual owner since those securities have been legally transferred to its account.

It further said that the order passed by Sebi in April 2020 against Modex, which is claimed to be the authorizing order based on which the NSE has passed the directions, does not even contain any direction against the lender.

The SAT has also directed Axis Bank, Modex International Securities, Sebi and others to appear before NSE on June 24.

"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," the SAT order said.

In its plea, Axis Bank said that it had submitted a list of securities to NSE in January, 2020 stating that those securities are given by clients of Modex and have dues pending in favour of Modex. Therefore, Axis Bank sought to liquidate the shares contained in that list to enable it to recover its entitled amount of Rs 21.62 crore and thereafter the remaining securities can be transferred.

"Therefore, the impugned directions by NSE ... do not have any legal basis to arbitrarily transfer the securities rightfully belonging to the appellant (Axis Bank) to certain third parties," the lender said.

The lender sought intervention of tribunal to stay the orders as well as to allow it to dispose of the securities worth Rs 21.62 crore and then release the remaining securities given by Modex to Axis Bank.

On the other hand, counsels of markets watchdog Sebi and NSE stressed that Axis Bank is holding securities worth more than Rs 90 crores given by Modex and the direction is relating to only securities worth Rs 34 crore.

Even assuming that the lender's entitlement is about Rs 22 crore, it is still holding excess securities that legitimately do not belong to it.

Since the impugned directions are not yet implemented Axis Bank is actually holding on to about Rs 70 crore worth securities legitimately belonging to others, they said.