Mumbai, June 14 : The Securities Appellate Tribunal (SAT) has directed the SEBI to conduct an independent inquiry against five brokers and persons associated with the brokers, and probe their role in the Rs 5,600-crore NSEL payment default case afresh within six months. In its recent order, the SAT noted serious allegations against five brokers - Motilal Oswal Commodities Broker Pvt Ltd, Anand Rathi Commodities Ltd, IIFL Commodities Ltd, Philip Commodities India Pvt Ltd, and Geofin Comtrade Ltd - of indulging in illegal activities such as funding of clients by way of PAN lending, name lending through their NBFC, and other related entities, and that funding was totally disproportionate to the net-worth and income level of these clients. The SAT also observed that the brokers have misused their in-house NBFC and have funded clients who had no capacity to take such exposure. These brokers channelised funds for trading without permission and knowledge of the clients and were engaged in market capturing practices by large-scale unique client code modifications. Pointing out that these allegations are very serious in nature, in its June 9 order, the SAT said: "The impugned orders passed by the SEBI Whole Time Member (WTM) against the brokers cannot be sustained and are quashed. The appeals of the brokers are allowed. The matters are remitted to the WTM to decide the matter afresh in the light of the observations made aforesaid in accordance with law after giving an opportunity of hearing to the brokers. It will be open to the WTM to rely upon other material such as the complaint letters of NSEL, EOW report, EOW charge-sheet, etc. if such copies are provided to the brokers, and the opportunity is given to rebut the allegations." "Such additional documents relied upon by the respondent should form part of the show-cause notice for which purpose, it will be open to the WTM to issue a supplementary show cause notice. It will also be open to the SEBI if it considers necessary, to conduct an independent inquiry proceeding against the connected entities and persons associated with the brokers against whom evidence is available. SEBI will decide the matter afresh within six months from today," added the 44-page SAT order. The entities who will be under the SEBI lens this time will be directors of brokerages, associate bodies, group entities, and bodies coming under the "Fit and Proper" criteria of the market regulator. The SAT order noted that there were two show-cause notices sent to brokers, the first contained incriminating materials and other details unearthed during agency probes, while the second was on their alleged association with the NSEL. The order passed by the SEBI WTM was based entirely on the second show-cause notice, which is totally unwarranted. The tribunal also observed that the SEBI WTM allegations against NSEL have directly affected the reputation, character, and integrity of the exchange, and such observations and findings which have been passed ex-parte without giving notice to the NSEL would adversely affect other proceedings against the NSEL pending before various courts of law/authorities. The SAT said observations and findings given by the WTM, which is averse to the NSEL cannot be sustained especially when no notice or opportunity of hearing was provided, which is violative of the principles of natural justice. "The adverse observations/findings against the NSEL in the SEBI orders be expunged and shall not be utilised against the NSEL in any court of law or before any authority," noted the SAT. /IANS