Hyderabad: The Central crime station of the Hyderabad police arrested C. Partha Sarathy, the chairman and managing director of Karvy Stock Broking Pvt. Ltd, on Thursday. The police were acting on a complaint filed by the vice-president of IndusInd Bank, Hyderabad, who said that Karvy Stock Broking Pvt. Ltd. had availed credit facilities of Rs. 137 crores by pledging securities and shares without the consent of clients and thereby misusing the power of attorney.
A case was registered at CCS DD Hyderabad. The securities were transferred into the Demat account of Karvy and pledged before the complainant for margin and short-term requirements in the business of KSBL on 1 March 2013.
The company became a defaulter by diverting the funds into its own and connected businesses entities. On 22 November 2019, SEBI had revoked the pledge of securities with banks/NBFCs and returned the securities and accounts. The bank was left with no collateral. KSBL had thereby defaulted in repayments of about Rs. 137 crores as of 31 March.
Further investigation revealed that the accused had also diverted clients' funds worth Rs. 720 crores that were lying in their bank accounts linked with their trading accounts. The company is said to have taken credit facilities from several other banks and NBFCs to the tune of about Rs. 680 crores by pledging clients' securities without their consent.
In this regard, SEBI had banned Karvy in 2020. Several criminal cases were registered at CCS DD Hyderabad against the company and others. On 19 August, Mr. Partha Sarathy was apprehended at Jubilee Hills in Hyderabad and produced before the court for judicial remand. The case is under investigation, the police said. Two other cases have been registered against KSBL and Karvy Commodities Pvt. Ltd. pertaining to loan frauds amounting to Rs. 340 crores and Rs. 7 crores, the police added.