The Sebi in its order had identified Rs 171.74 crore worth of shares where clients had fully-paid the dues. Axis Bank
had submitted that even in these shares there was indebtedness and the data needed to be re-examined.
In its order, Sebi said the transfer of unpaid client shares worth Rs 13.69 crore, which were pledged in favour of Axis Bank by Karvy, can be allowed if the bank is able to furnish proof of authorisation by each client.
Sebi’s whole-time member also observed that pledging of securities of unpaid clients required ‘explicit authorisation’ from each client and power of attorney (PoA) given by the clients was not sufficient authorisation to create such a pledge. Axis Bank in its arguments had said that the PoA was sufficient authorisation, the order pointed out.
Axis Bank had extended an overdraft facility to Karvy Stock Broking, against which the share pledges were created. Karvy owed Rs 80.47 crore to Axis Bank.