MUMBAI: A new crisis seems to be engulfing the debt-ridden IL&FS group. One of the group firms, IL&FS Securities Services (ISSL), had moved the Supreme Court for relief in a fraud case involving one of its clients Allied Financial Services, a stockbroker.
The SC on Wednesday asked ISSL to approach the appropriate court in this regard. ISSL had sought annulment of trade carried out on behalf of Allied after a SEBI investigation froze the margin commitment the broker had given in the form of MF units to the tune of Rs 380 crore. Earlier, the Securities Appellate Tribunal (SAT) had turned down the request to annul the trade as it was not permissible under Sebi rules.
After this, ISSL moved the apex court, which has now asked it to approach the appropriate court. Since ISSL cannot utilise the margin payments made by Allied in the form of mutual fund units after it was found to be a case of fraudulent use of securities owned by others, it sought annulment of trade. The question of the annulment of trade cannot happen as per the rules say experts. The matter is likely to be heard at the Bombay HC and may be referred back to SAT.
While the trade settlement would go on as it will be settled by the exchanges concerned, ISSL clients are worried. Some brokerages using ISSL clearing services want to move out as their clients are not comfortable using the services of an arm of the bankrupt IL&FS. “I have squared off my trades, got back my FDs immediately. They tried to convince me to stay, but our clients were not comfortable,” said a broker.
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Though ISSL remains a solvent entity, the Allied fraud has cast doubt in the minds of clients who are desperate to get their money back and move out