Karvy scam: One more arrested for creating false document to obtain Rs 350 Cr loan

Hyderabad: Adding to the spate of arrests in the Karvy Stock Broking Limited case, the company secretary of the group, Y Sailaja, was arrested by the city police for creating a false resolution document which resulted in the managing director of Karvy pledging his clients’ shares to avail a bank loan of Rs 350 crores.

Sailaja had claimed that the resolution was passed in the original board of directors meeting which had not actually happened.

A day earlier, the chief operating officer Rajiv Ranjan Singh and the chief financial officer G. Krishna Hari of the Karvy Stock Broking Private Limited were arrested by officials of the central crime station today.

They were arrested after an FIR was filed against Karvy Stock Broking company base on a complaint by the vice president of IndusInd bank, Hyderabad on allegations of availing credit facilities of Rs. 137 crores from the complainant bank by pledging securities/shares and personal guarantee of Chairman C Parthasarathi. The accused suppressed the facts that the pledged securities actually belong to the clients and did so without their consent.

The securities were transferred into the Demat account of Karvy Stock Broking Limited and pledged before the complainant bank for margin and short-term requirement in the business of KSBL from March 1, 2013.

 The accused company became a defaulter by diverting the funds into their own and other connected businesses entities and on November 22, 2019, the SEBI revoked the pledge of securities with Banks/NBFCs and returned the securities/accounts.

The complaint bank was left with no collateral and thereby KSBL defaulted in repayments of about Rs 137 Crores as on 31.03.2021. The managing director and co-accused C Partha Sarthy was arrested earlier and remanded to judicial custody.

During the course of the investigation, it was revealed the CEO of KSBL Rajiv Ranjan Singh, who is in charge of trading and broking, unauthorizedly executed trading in 9 other companies trading accounts from 2014 to 2019. It also came to light that the CFO of KSBL G. Krishna Hari diverted funds that were raised from banks by pledging client securities as collateral to 9 Shell companies as per the oral instructions of C. Partha Sarathy.

Further, several criminal cases were registered at CCS DD Hyderabad against the accused company and others. The above-accused persons were arrested and produced before the court for judicial remand and the case is still being investigated, said a press release from the Hyderabad police.