After the embarrassment over the IndiaBulls flip-flop, SEBI was delivered another blow by the Andhra Pradesh High Court, which admitted a writ petition filed by Karvy DP against SEBI's interim order in the IPO scam.
The High Court has also granted an interim stay on the SEBI directive to clients of Karvy DP to shift their demat accounts to other depository participants within 15 days.
In the writ petition, Karvy has contested SEBI's jurisdiction to direct demat account holders to shift their accounts from one DP to another. The company argued that the provisions of the SEBI Act and the Depositories Act do not provide SEBI with such sweeping powers.
Karvy DP has also challenged the delegation of quasi-judicial powers of SEBI to a single member of the board. G Anantharaman, member SEBI, had passed the interim order against Karvy and others.
According to some legal experts, SEBI does have the powers to issue such directives. However, the exercise of such powers in an interim order is questionable.
The interim order from SEBI directing demat account holders to shift their accounts from Karvy DP and Pratik DP to other DP's was criticised as too harsh. The order came ahead of the completion of full investigation and formal framing of charges against Karvy. Moreover, Karvy is also facing investigations by other agencies like the CBI.
SEBI is expected to appeal against the interim stay by the Andhra Pradesh High Court. The court would take up the write petition filed by Karvy only after the summer holidays.