Telangana HC junks Karvy’s pleas challenging SFIO probe

HYDERABAD: In a setback for scam-hit Karvy Stock Broking Ltd (KSBL), the Telangana High Court on Wednesday dismissed the two petitions filed by the beleaguered company challenging the Union corporate affairs ministry’s (MCA) decision to order a probe into the company’s affairs through its investigation agency Serious Fraud Investigation Office (SFIO) and the Registrar of Companies (RoC).
Justice A Rajasheker Reddy of the Telangana HC not only refused to accept KSBL’s argument that the Centre ordered the probe without sufficient material before it, he also brushed aside the company’s allegation that the Centre’s action was contrary to the provisions of the Companies Act.
Agreeing with the argument of the assistant solicitor general (ASG) of India in the Telangana HC, Namavarapu Rajeswara Rao, that the MCA followed the law in all respects, the judge dismissed Karvy’s pleas. A copy of the judgment is yet to be uploaded onto the court’s website.
In his argument, the ASG contended that markets regulator Sebi, the oversight committee of the ministry, the RoC, the regional director of the ministry, a forensic audit and several others have gone through the complaints against Karvy and concluded that a thorough probe is essential.
The ASG stated that Karvy flouted the norms by pledging its clients’ shares without their consent to raise Rs 1,141 crore and diverted the money to its realty company.
Reacting to Wednesday’s judgment, Karvy’s counsel said they will file an appeal against the high court order. Contending that Sebi’s order Sebi was ex parte and interim in nature and that the NSE order was temporary in nature, the Karvy counsel said the company has not yet made its representation.
He said RoC has taken recourse to documents that are interim in nature and have not yet been explained by the company, which is why KSBL believes it they will be in a position to substantiate and submit the factual position with respect to most of the issues that have been raised.
He also said KSBL has sorted out and effected payments to over 1.3 lakh clients and is in the process of settling the balances as soon as they mobilise the funds, which will be done very shortly.