Under the Prevention of Money Laundering Act (PMLA), 2002, the Directorate of Enforcement (ED) has provisionally attached assets worth Rs 134.02 crore in the form of 1000 Non-Convertible Redeemable Preference Shares of face value Rs. 200 each of M/s KFin Technologies Ltd (KFintech) held in the name of son of C. Parthasarathy, the CMD of M/s Karvy Stock Broking Ltd on 23/10/2023.
The ED launched an inquiry based on FIRs filed by the CCS Hyderabad Police, alleging that KSBL obtained loans by unlawfully pledging its clients’ shares worth around Rs. 2800 crore and failed to repay the loans, which were later classified as NPA and fraud accounts. The loan funds were diverted to related companies such as Karvy Data Management Services Ltd., Karvy Realty India Ltd., and others for purposes other than those stated, and the diverted loan funds were routed to Karvy Financial Services Limited (an NBFC of the Karvy Group) to wash its bad debt accounts/NPAs via multiple defunct NBFCs.
C. Parthasarathy has unique privileges and rights to subscribe to additional equity shares of M/s KFin Technologies Ltd. (Kfintech) at a pre-determined price, according to the Shareholders Agreement dated 03.08.2017, according to an ED inquiry. In exchange for the termination of the Shareholders Agreement and the extinguishment of all such rights, KFintech granted Adhiraj Parthasarathy s/o C. Parthasarathy 1000 Non-Convertible Redeemable Preference Shares at par on October 25, 2021.
The agreed-upon redemption premium/termination charge was Rs. 164 Crore. However, the payment was reduced by Rs. 30 crore after Kfintech identified some unauthorized transfers of Petronet LNG Limited shares to the Demat accounts of KSBL and Karvy Consultants Limited (KCL), triggering the mutual agreement’s indemnification payout provision. As a result, these shares were redeemable after two years for a net redemption premium of Rs. 134.02 Crore.
The ED inquiry further found that the stated issue of Redeemable Preference Shares is in lieu of C. Parthasarthy’s rights and privileges in Kfintech, and therefore he has the principal right or ownership of the said amount received. C. Parthasarathy and his associates agreed that the aforementioned payment from KFintech be collected in the name of Adhiraj Parthasarathy, who is not included in the FIRs.
Furthermore, Adhiraj Parthasarathy hid the abovementioned property in the form of Redeemable Preference Shares and failed to declare it in his statements to the ED during the course of the inquiry. The total attachment in this case is Rs. 2229.56 Crore. More research is being conducted.
