The Enforcement Directorate (ED) on Saturday said it has frozen shares worth Rs 700 crore after raids against Karvy Stock Broking Limited (KSBL) CMD C Parthasarathy and others as part of a money-laundering investigation against them. He is currently lodged in the Chanchalguda jail of Hyderabad after being arrested by the Telangana Police last month.
The ED searches were carried out on September 22 at six locations in Hyderabad and on various premises of Karvy group of companies, connected entities and the residential premises of C Parthasarathy, the agency said in a statement.
"Several incriminating evidences in the form of property documents, personal diaries, electronic devices, email dumps, etc have been seized and are being analysed," it said.
"It is reliably learnt that C Parthasarathy is trying to off-load his shares in the group companies through private deals and thus, in order to preserve the proceeds of crime till further investigation, ED has issued a freezing order on September 24 and the estimated value of these shares has been arrived at Rs 700 crore as per the valuation for the year 2019-20," it said.
These shares of the Karvy group are being held "directly and indirectly" by CMD Comandur Parthasarathy, his sons Rajat Parthasarathy and Adhiraj Parthasarathy, and their entities.
The ED case, filed under the criminal provisions of the Prevention of Money Laundering Act (PMLA), is based on a Telangana Police FIR alleging KSBL had "illegally pledged the securities of its clients and taken a loan of Rs 329 crore and diverted the same."
"Another FIR has been registered by central crime station of Hyderabad Police for defrauding IndusInd Bank to the tune of Rs 137 crore and one more FIR has been registered by Cyberabad Police authorities for defrauding ICICI Bank to the tune of Rs 562.5 crore," it said. The ED has clubbed all these FIRs as part of its probe and has also recorded the statement of C Parthasarathy in jail.
KSBL under the leadership of C Parthasarathy had committed "gross irregularities" and all the illegally taken loans have become NPA, the agency said. It is learnt that more FIRs are being registered by other banks and also individual shareholders/ investors, the ED said.
The total loan proceeds taken from multiple banks using the same modus operandi is around Rs 2,873 crore, it said, adding that the NSE and SEBI are also investigating the affairs of KSBL. The agency said its probe found that KSBL "did not report" the depository participatory or DP account no. 11458979, named KARVY STOCK BROKING LTD (BSE), in the filings made from January-August, 2019 with regulators/exchanges.
"KSBL fraudulently transferred shares belonging to its clients to its own demat account (which is not disclosed to the exchanges) and pledged the shares held in these accounts with the lenders/banks (HDFC bank, ICICI bank, IndusInd bank, Axis Bank, etc.)." "The securities lying in the aforesaid DP account of KSBL, actually belonged to the clients who were/are the legitimate owners of the pledged securities," the agency said.
It said KSBL did not have any legal right to create a pledge on these securities and generate funds.
"The quantum of such loans taken by KSBL from illegal pledge of shares is to the tune of Rs 2,873 crore. KSBL credited the funds raised by pledging of client securities to 6 of its own bank accounts (stock broker-own account) instead of the "Stock Broker-Client Account" and further has not reported these 6 own bank accounts (stock broker-own account) held with various private banks to the Sebi," it alleged.
Prima facie, the ED said, a net amount of Rs 1,096 crore was transferred by KSBL to its group company–Karvy Realty (India) Ltd– between April 1, 2016 to October 19, 2019. It accused KSBL of conducting "large-scale trading activities in the names of 9 companies that included Karvy Consultants Limited (KCL), which is a group company of Karvy, and 8 other shell companies, in the guise of doing insurance business."
"Several crore of rupees were diverted for acquiring immovable properties through the group company, KRIL, and to other group companies as well." It also came to light that recently deletion of files and emails from the computer servers by using anti-forensic tools had been done, under the instructions of C Parthasarathy," it claimed.
The bank statement analysis of these companies revealed that there is "large value rotation of funds" between the Karvy group companies and the bank accounts of certain shell companies.
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