Karvy CMD ‘apology’ mail helps cops nail loan fraud

Hyderabad: An alleged apology sent by

Karvy

Stock Broking Ltd (KSBL) chairman and managing director C Parthasarathy to SEBI in 2019 in the form of an email came in handy as a proof for Hyderabad police to substantiate their case that KSBL was allegedly pledging its clients’ securities with banks to obtain loans.

This key communication was corroborated to police by SEBI which even made a vain follow-up with Parthasarathy and others in KSBL to revoke the client securities.

In response to a clarification sought by SEBI in early 2019 on the need to revoke the pledged securities of the clients, Parthasarathy in his email expressed regret by calling it an ‘irregularity’ and tendered his apology. Besides, he gave a commitment to SEBI to comply with its June 20, 2019 order and sought time till September 30, 2019, to revoke the pledged clients’ shares. But, KSBL allegedly could not comply and SEBI gave further reminders before barring KSBL to do trading in November.

“In that email from Parthasarathy, there is a clear mention of pledging clients’ securities and he apologised to SEBI. While taking the loan from the banks, KSBL represented by Parthasarathy claimed that those securities, being pledged to the bank for taking loans, belong to the company,” sources in Hyderabad police told TOI while confirming about the email.

In the chargesheet filed by Hyderabad central crime station a few days ago in Nampally criminal court in connection with KSBL’s allege default of Rs 137 crore to IndusInd Bank a few days ago, the email reference was mentioned. Using this loan, KSBL representatives allegedly transferred the money to 22 primary subsidiary companies. From these subsidiary companies, the money was again shifted to another 140 subsidiary companies whose investigation is still being done. From most of these subsidiary companies, stock trading was done.

“To transfer money from a parent firm to its subsidiary firms, there has to be board resolutions. In this case, there were insufficient documents to back this claim. In a few cases, there were KSBL resolutions to divert the money to a subsidiary firm like Karvy Realty & Services Limited. But at least in one case, there was more fund diversion than what was resolved in the board meet,” sources told TOI.