ICICI Bank files cheating case against Karvy Stock Broking

Our Bureau Hyderabad | Updated on August 25, 2021

Alleges KSBL had committed ₹563 crore fraud; Economic Offences Wing to probe

Within days of the arrest of Karvy Group promoter and arrest of its founder Chairman and MD, C Parthasarathy in a bank fraud case, ICICI Bank has filed a cheating case against Karvy Stock Broking Company Limited.

Following the complaint, a case was registered against KSBL and transferred to the Economic Offences Wing, Cyberabad, and a special team was formed to investigate the case, according to the Cyberabad Commissioner of Police on Tuesday.

Read also: Karvy Group promoter held for defaulting on bank loans

A case in Cr. No 891/2021, under section 406, 420, read with 34 IPC, was registered at Gachibowli Police station, based on a complaint by ICICI Bank, against KSBL, C. Parthasarathy, Meka Yugandhar and others for cheating and criminal breach of trust.

Karvy Stock Broking Company Limited, located in Financial District at Gachibowli, and promoted by C Parthasarathy, M Yugandhara Rao and MS 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).

Read more: Karvy mess: Who is to blame?

In its circular, the Securities and Exchange Board of India (SEBI) directed that Clients’ securities lying with trading members/clearing members cannot be pledged to banks/NBFCs for raising funds SEBI also specified that the broker should maintain clear segregation of client beneficiary account and its own beneficiary account.

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,’ in contravention with the SEBI guidelines.

Further, all pledges on securities were closed without approval from pledges and securities were transferred to end clients of KSBL, thereby severely impacting the security of all lenders, including ICICI Bank, the complaint stated.

KSBL, with the alleged dishonest and fraudulent intention of cheating, and criminal conspiracy, had misappropriated the financial assistance for their personal benefit, thereby caused a criminal breach of trust, wrongful loss to ICICI Bank and wrongful gain to the company and its management. They, thereby, committed the fraud amounting to ₹563 crore, it was contended.

Published on August 25, 2021

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