Telengana High Court dismisses Karvy’s appeal challenging probe by SFIO

In a setback for scam-hit Karvy Stock Broking Ltd (KSBL), the Telangana High Court has dismissed the two petitions filed by the beleaguered company challenging the decision of the Ministry of Corporate Affairs (MCA) 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 High Court 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.

The Judge agreed with the argument of the Assistant Solicitor General (ASG) of India in the Telangana High Court, N Rajeswara Rao, that the MCA followed the law in all respects. Taking into consideration, the arguments of the ASG who had submitted that the action of the company affected the interests of over 93,133 depositors, the judge rejected Karvy’s pleas. The primary investigation itself proved that the company had indulged in financial irregularities and in spite of several debts, the company transferred around Rs. 425 crore to the realty sector.

In his argument, the ASG contended that the Securities and Exchange Board of India (SEBI), the oversight committee of the MCA, 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 shares without their consent to raise Rs.1141 crore and diverted the money to its realty company.

Karvy is set to file an appeal against the high court order.