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Informist, Tuesday, Mar. 4, 2025

By Rajesh Gajra

NEW DELHI – The Securities and Exchange Board of India has made a mention of a large contingent liability in its audited annual accounts for the financial year 2023-24 (Apr-Mar) in respect of a Securities and Appellate Tribunal order of Dec. 20, 2023 in a Karvy Stock Broking-related matter. The annual accounts for FY24, released by SEBI Tuesday, was audited by the Comptroller and Auditor General of India.

Ruling against SEBI's orders of November 2019 and January 2020 in Karvy Stock Broking scam matter, the tribunal had in its order in December 2023 directed SEBI, National Stock Exchange of India Ltd., and National Securities Depository Ltd. to restore the pledges of securities made by the brokerage in favour of Axis Bank Ltd., Bajaj Finance Ltd., HDFC Bank Ltd., ICICI Bank Ltd., and IndusInd Bank Ltd. The value of these securities was INR 38.32 billion as on Mar, 31, 2024, along with accumulated interest of INR 760 million.

As per the tribunal's order, the restoration of the pledges has to be done jointly by SEBI, NSE, and NSDL, and SEBI has therefore not specified an exact amount of contingent liability. The entire amount, however, finds mention in the notes to SEBI's annual accounts on contingent liabilities.

In its first few orders in the Karvy Stock Broking scam case that started from November 2019, SEBI had ordered for the specified securities to be transferred to investors, who were clients of Karvy Stock Broking, and from whose accounts the brokerage had siphoned off securities, pledged them illegally with banks, and borrowed INR 15 billion to INR 18 billion against the pledged securities.

The four banks and one non-banking finance company to whom the brokerage had illegally pledged the clients' securities appealed to the tribunal against SEBI's orders, and the tribunal in its final order in December 2023 ruled in their favour. SEBI, NSE, NSDL immediately appealed in the Supreme Court against the tribunal's order and were granted a stay on the implementation of the restoration order. The appeals against the tribunal's orders are pending in the Supreme Court.

Meanwhile, as per the audited annual accounts of SEBI for FY24, the surplus of income over expenditure of the market regulator surged by 93% to INR 10.69 billion from INR 5.53 billion in FY23. This resulted in a 24% increase in the General Fund, also known as Capital Fund, to INR 55.73 billion as on Mar. 31, 2024 from INR 45.08 billion the previous year.

SEBI's total income rose 48% to INR 20.75 billion, led by a 53% jump in income from fees to INR 18.51 billion. The total expenses of SEBI increased 18% to INR 10.06 billion because of a 21% rise in establishment expenses to INR 7 billion.

The Comptroller and Auditor General of India also said in a note to the accounts that SEBI did not have its own internal audit cell, and that the internal audit was carried out by a chartered accountant firm appointed by the SEBI board for the purpose.  End

Edited by Ashish Shirke

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