The Cyberabad police have formed a special team to investigate a case against Karvy Stock Broking Limited (KSBL), its chairman C. Parthasarathy and others for allegedly duping ICICI bank of Rs 563 crore.
Parthasarathy is already in judicial custody in Rs 137 crore loan default case registered by Hyderabad police on a complaint filed by IndusInd Bank.
Cyberabad police on Monday registered a case of cheating and criminal breach of trust against KSBL, C. Parthasarathy, M. Yugandhara Rao and others, on a complaint given by the ICICI Bank manager.
According to Cyberabad Police Commissioner V.C. Sajjanar, the case has been transferred to Economic Offence Wing (EOW) and a special team has been formed for investigation.
The complainant alleged that “KSBL, with dishonest and fraudulent intention of cheating, by planning criminal conspiracy, in collusion/connivance with other unknown unscrupulous person(s), if any, had misappropriated the financial assistance for their personal benefit thereby caused criminal breach of trust, wrongful loss to ICICI Bank with corresponding wrongful gain to themselves.”
KSBL is facing the allegations of defaulting on the loans of various banks by pledging its clients’ securities.
Funds raised by KSBL by pledging shares from its six bankers were transferred to KSBL’s own bank accounts, and not into ‘Stock Broker Client Account’, which is in contravention with the SEBI guidelines, the Cyberabad police said.
Further, all pledges on securities were transferred to end clients of KSBL thereby severely impacting security of all lenders including ICICI Bank, it said.
KSBL, promoted by C. Parthasarathy, M. Yugandhara Rao and M.S. Ramakrishna, was a member of National Stock Exchange (NSE), Bombay Stock Exchange (BSE), Multi Commodity Exchange of India (MCX) and Metropolitan Stock Exchange of India (MSEI) and a depository participant registered with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
The Securities and Exchange Board of India (SEBI) in its circular had directed that clients’ securities lying with trading members/clearing members cannot be pledged to banks/NBFCs for raising funds. The SEBI also specified that broker should maintain clear segregation of client beneficiary account and its own beneficiary account.
In 2019, SEBI had banned KSBL for illegally pledging client securities to raise loans against shares.
Hyderabad police arrested Parthasarthy on August 19 for allegedly defaulting the loan taken from IndusInd Bank. The same day, a city court remanded him to judicial custody for 14 days.