Scam-hit Karvy Stock Broking Chairman and Managing Director C Parthasarathi was arrested on Thursday on charges of defaulting a bank loan and for cheating and misuse of clients’ funds, the Hyderabad police said.
The founder of the financial services firm was arrested after a complaint by IndusInd Bank alleging that his firm had defaulted on a ₹137-crore loan.
Avinash Mohanty, Joint Commissioner of Police, (Detective Department) said that Parthasarathy was taken into custody for defaulting on a loan taken from the IndusIndbank and diverting the fund to other bank accounts.
“HDFC Bank has also filed two cases alleging fraud of nearly ₹350 crore,” Mohanty said.
The banks in their complaint alleged that Karvy group represented by Parthasarathy unlawfully pledged the shares of its clients and availed loans, according to a PTI report.
The loan amounts have been diverted to other firms and subsequently defaulted on repayment, the official added. According to the complaint filed by IndusInd Bank Karvy availed credit facilities of ₹137 crore from the bank by pledging securities/shares and personal guarantee of Parthasarathy without the clients’ consent and by misusing power of attorney.
“The accused company became defaulter by diverting the funds into own and connected businesses entities and on November 22, 2019 the SEBI revoked the pledge of securities with Banks/NBFCs and returned the securities/accounts. The complaint banks were left with no collateral and thereby KSBL defaulted in repayments of about ₹137 Crores as on March 31, 2021,” a press release from the police said.
Further probe revealed that the accused also diverted the ₹720 crore of clients funds which are lying in the bank accounts linked to their trading account and Karvy is also learnt to have taken credit facilities from several other banks/NBFCs to the tune of about ₹680 crores by pledging client securities without their consent and defaulted further repayment, the release said.
Two cases based on complaints from the HDFC bank have also been registered against KSBL and Karvy commodities pertaining to loan frauds amounting to ₹340 crore and ₹seven crore, it added.
In November 2019, SEBI barred KSBL from taking new brokerage clients after it was found that the brokerage firm had allegedly misused clients’ securities to the tune of over ₹2,000 crore.
In November last year, theBombay Stock Exchange declared Karvy Stock Broking as a defaulter and removed the brokerage house from its membership after a similar action was initiated by the National Stock Exchange.
With agency inputs
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