Hyderabad: Hyderabad Police arrested Karvy Stock Broking Chairman and Managing Director C Parthasarathi on Thursday on the grounds of cheating and misuse of clients funds. The police arrested on the complaints of IndusInd Bank and HDFC bank alleging that this firm had defaulted on a Rs. 137 crores and Rs. 350 crores to the respected banks.

According to the Joint Commissioner of police Avinash Mohanty said, the police alleged cheating and “gross violation” of the Securities and Exchange Board of India’s (Sebi) norms on the Hyderabad-based company’s part, besides criminal breach of trust and criminal conspiracy.

The stock and commodities market regulator had, in 2019, initiated a probe into various irregularities that the company was accused of. It was found that Karvy had raised loans from banks and transferred the funds to its own subsidiary companies to be used as working capital. It had borrowed from ICICI Bank, Bajaj Finance, and Kotak Bank, apart from IndusInd Bank and HDFC Bank, Mr Mohanty said.

These loans had been taken over several years, with the company pledging securities as collateral, the police said. However, the Sebi probe revealed that the securities pledged were those of the company’s clients and not its own as the banks had assumed initially. Following this revelation, Karvy was, in 2020, barred from trading on NSE and BSE.

Since the money raised this way was used as working capital, the police said, the company began to default. Karvy Stock Broking’s two lakh-odd clients have not filed any complaints yet, the police said.