SAT dismisses Sebi order against HDFC Bank in BRH Wealth Kreators case

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In its order on Friday, SAT said the bank was justified in invoking the pledge made by the broker BRH. While invoking the pledge the bank did not violate any direction contained in Sebi's interim order.

"The appellant (HDFC Bank) could invoke the pledge under Depositories Act and is not required to approach any forum or Court of law for invocation of the pledge. The assets of the broker do not include a pledge of the shares created by the sub-broker," SAT said.

The tribunal noted that the pledge was created by the broker BRH under the Depositories Act in favour of HDFC Bank. According to SAT, once a pledge is validly created by the broker in favour of the appellant (HDFC Bank) and the appellant is recorded as the beneficial owner in the records maintained by the depository, the beneficial owner becomes the registered owner.

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Consequently, if a default is committed by the broker, the appellant gets a right to invoke the pledge under the agreement, it added. "Nothing has come on record to indicate that the invocation of the pledge by the appellant was wrongly done as there was no default committed by the broker," SAT said.

Accordingly, the tribunal said that Sebi's order "cannot be sustained and is quashed".