Plea before Bombay High Court seeks return of shares lying with NSE, compensation for loss

In a first of its kind, a petition has been filed before the Bombay High Court seeking return of shares lying with the National Stock Exchange, the national market regulator, after an approved intermediary with the NSE was declared as a defaulter [Pushpa Shah & Anr. v. National Stock Exchange & Anr.].Senior Advocate Venkatesh Dhond, appearing for the NSE, sought time to respond to the petition on Wednesday which was granted by Bench of Justices SV Gangapurwala and RN Laddha.The plea will now be heard on November 17, 2022.The petitioners, Pushpa Shah and her daughter Pooja Shah, had participated in the Stock Borrowing and Ending Scheme (SLBM) as clients with one Anugrah Stock Broking Pvt Ltd as 'approved intermediary' of NSE. They lent their shares of IDFC First Bank to Anugrah.After 2 months, they opted out of the scheme and, therefore, did not renew their agreement with the intermediary.In November 2020, the intermediary was declared as a defaulting entity by NSE, the plea stated, and they were disentitled from participating in stock market functions.After such announcement, the petitioners made multiple requests to NSE and the Securities Exchange Board of India (SEBI) for the return of their shares to the Central Depository Services (India) Ltd. (CDSL) accounts.After exhausting every available alternate remedy, the petitioners decided to move the High Court seeking transfer of their shares of IDFC Bank to their accounts.The petitioner besides seeking return of the shares have also sought compensation of the loss faced by them as a result of not having access to their shares for almost 2 years and the legal fees incurred..The petitioners told the Court that NSE had rejected their request stating that they had participated in the SLBM scheme through a trading member who had been declared a defaulter in November.To this, the petitioners argued that they had not renewed their agreement in October 2020, and any shares utilised by Anugrah post that, was without their consent.“Anugrah was never the shareholder, but merely an agent facilitating the process, let alone at the time of their default. The petitioners had legal rights over the shares hence the shares should have been transferred,” the plea through advocate Amrita Nair said.The petitioners also raised a grievance that there was no provision for a redressal mechanism for investors under the stock lending and borrowing scheme, which made it difficult for them to seek relief.The petitioners contended that the NSE is obligated to return their shares as per the agreement between them and the intermediary as provided for under NSE, SEBI circulars and bye laws.As a market regulator, NSE was a protector of investor's rights, the plea said."In light of carrying out the duties and obligations set forth, they must protect the rights and interests of the petitioners and transfer the shares to the petitioners' current CDSL accounts as requested," the petitioners emphasized..[Read Order]