Karvy Stock Broking chairman arrested in Hyderabad for defaulting on bank loan

HYDERABAD: The Hyderabad polic arrested C Parthasarathy, Chairman, Karvy Stock Broking Ltd (KSBL), on Thursday. The move comes nearly two years after allegations of the Rs 2,300 crore stock broking scam first came to light in the winter of 2019.

Parthasarathy, known as CP in industry circles, was booked for criminal breach of trust, cheating, criminal conspiracy and others under section 406, 420, 409, 421, 422, 120 (B) of the Indian Penal Code. If the charges against him is proved, he’ll join the list of bad boy billionaires including B Ramalinga Raju, Vijaya Mallya, Mehul Choksi, Subrato Roy and others. 

A chartered accountant-turned-businessman, Parthasarathy made desperate attempts to rope in investors and settle the bills. But more than missed payments to lenders, allegations of fund diversion and misusing customers’ monies called it in. Parthasarathy was produced before a court which sent him to judicial remand.

While multiple banks lodged complaints and moved debt recovery tribunals, the police made the arrest based on the complaint filed by IndusInd Bank. In 2019, IndusInd Bank lent Rs 185 crore to KSBL on depositing securities and guarantees. The bank alleged that the brokerage not only failed to honor its payments, but also illegally transferred Rs 138 crore to other group entities.

In November 2019, Sebi revoked the pledge of securities with banks and NBFCs. This resulted in the IndusInd bank being left with no collateral security. Thereafter, Karvy began defaulting repayments as on March 31, 2021. The bank alleged that Karvy availed credit facilities of Rs 137 crore by pledging securities, shares and personal guarantee of Parthasarathi.

IndusInd plaint led to arrest

While multiple banks lodged complaints and moved debt recovery tribunals, the police made the arrest based on the complaint filed by IndusInd Bank. In 2019, IndusInd Bank lent Rs 185 crore to KSBL on depositing securities and guarantees. The bank alleged that the brokerage not only failed to honor its payments, but also transferred Rs 138 crore to other group entities.