Chairman and Managing Director of Karvy Stock Broking Private Limited, C Parthasarathy, 67, was arrested by the Hyderabad police for allegedly cheating Induslnd Bank by availing credit facilities of ₹137 crore.
The accused pledged securities/shares on a personal guarantee by suppressing the facts that he pledged the securities of his clients without their consent by misusing the power of attorney.
Based on the complaint lodged by vice-president of IndusInd Bank, Hyderabad, the Central Crime Police registered a case against the accused company and arrested Parthasarathy on Thursday from his residence in Jubilee Hills.
“The securities were transferred into the demat account of Karvy stock Broking Pvt. Ltd., and pledged before the complainant for margin and short-term requirement in the business of KSBL from March 1, 2013,” Joint Commissioner of Police (Detective Department) Avinash Mohanty said.
Karvy became a defaulter by diverting the funds into own and connected business entities and on November 22, 2019, the SEBI revoked the pledge of securities with banks/NBFCs and returned the securities/accounts, he said.
The complainant bank was left with no collateral and thereby KSBL defaulted on repayments of about ₹137 crore as of March 31.
Further investigation by the city police has revealed that the accused also diverted ₹720 crore of clients funds which are lying in the bank accounts linked to their trading account.
“The company is also learnt to have taken credit facilities from several other banks/NBFCs to the tune of about ₹680 crore by pledging client securities without their consent and defaulted further repayment,” Mr. Mohanty said, adding that as a result of their financial frauds, SEBI banned Karvy in 2020.
Several criminal cases were registered at CCS DD Hyderabad against the accused company and others and two cases were registered against KSBL and Karvy commodities Pvt Ltd. pertaining to loan frauds amounting to ₹340 crore and ₹7 crore.
Parthasarathy was arrested and produced before the XII ACMM Court for judicial remand and the case is under investigation, the officer added.