Buch deeply regrets Sebi inaction on de-freezing Kirloskar shares

SEBI chairperson Madhabi Puri Buch.

Securities Exchange Board of India (Sebi) chairperson Madhabi Puri Buch says that the market regulator deeply regrets not de-freezing the shares held by the Kirloskar family in Kirloskar Industries Limited (KIL) despite an order of the Securities Appellate Tribunal.

"We deeply regret what happened with Kirloskar," she said while speaking to journalists on the sidelines of the Global Economic Policy Forum in New Delhi's Bharat Mandapam. "We take this very seriously and this is unacceptable."

Follow our market blog for all the live action

The Securities Appellate Tribunal (SAT) lashed out at the market regulator on December 4, slapped a Rs 5-lakh fine for not de-freezing the shares, and labelled Sebi's approach in this matter as "lackadaisical" that caused sufferings to the investors.

On October 20, 2020, the regulator had restrained the appellants from accessing the securities market for six months, for not disclosing price-sensitive information on KIL on time. The appellants challenged this order before the tribunal, which passed an interim order on December 24, 2020, staying the Sebi order partially "subject to an undertaking to be provided by the appellants to the effect that they would not sell the shares of Kirloskar Industries Limited".

On October 12, 2022, the tribunal's order removed this restriction too. Despite that, as the SAT order noted, the appellants' shares in KIL remained frozen.

The Kirloskars had emailed Sebi on February 22, 2023, urging it to direct depository participant National Security Depository Limited (NSDL) to unfreeze their KIL shares.

A day later, they also wrote to NSDL, seeking to unfreeze the shares.
The next day, on February 24, 2023, the NSDL requested the Kirloskars to share further details from Sebi regarding the directions given by SAT.

When SAT asked NSDL for a response, the depository said that they could not act on Sebi's email because the Permanent Account Number (PAN) of the appellants were not provided.

NSDL also submitted that it had reached out to the regulator for instruction, in an email dated March 13, 2023, and that the regulator had not responded to that query.

The market regulator contended that the depository had sent this letter to a wrong email ID and therefore the query went unattended. "Having heard the learned senior counsel for Sebi and NSDL, we find that a blame game has started between Sebi and NSDL," noted the SAT order. "The net result is that there is apathy on the part of Sebi in not taking follow-up action."

The order went on to say: "We find that the interest of the investors, namely, the appellants, was least considered and apathy was writ large."

The tribunal said that once the current application was filed on November 1, 2023, "all hell broke loose" and the demat accounts were unfrozen.
"This, by itself, speaks volumes of the functioning of Sebi in reacting to matters at the last moment," read the order.

Also read | Sebi looking at creating new asset class between mutual fund and PMS, says Madhabi Puri Buch