HYDERABAD: The noose is further tightened on Karvy Stock Broking Ltd with the Ministry of Corporate Affairs (MCA) ordering a probe by the Serious Fraud Investigation Office (SFIO) into the alleged financial irregularities.
The order issued on February 27, directed SFIO officials to investigate not only into the affairs of Karvy and its group companies but also nine other entities including Wizard Insurance Services, Zenith Insurance Services, Buoyant Insurance, Nova Wealth Management Services, Karvy Consultants, Vitalink Wealth Advisory Services, Classic Wealth Management Services Pvt Ltd, Champion Insurance Services, and Pelican Wealth Advisory Services.
The investigation initiated under Section 212 (1) of the Companies Act, 2013 was based on the Registrar of Companies’ inquiry report submitted on February 24, pointing towards a potential fraud at the city-based brokerage.
"...In exercise of powers conferred under Section 212 (1) (a) & (C) of the Companies Act, 2013 the central government has formed an opinion that the affairs of the above referred companies need to be investigated to examine the serious nature of fraud committed as large public interest is involved," it said.
On its part, Karvy challenged the MCA order in High Court on Tuesday, but its petition was dismissed. It’s expected to file a fresh petition on Wednesday. Karvy sought interim relief so as to prevent MCA officials from taking any 'coercive steps including investigation under Section 212 of the Act.'
It further argued that the RoC’s investigation under section 206 to 208 were ongoing besides of course the final decision of markets regulator SEBI, which barred the company from doing business. Karvy officials hoped the confusion will be put to rest after their deliberations with the MCA due this Thursday.
"We will file a fresh petition tomorrow (Wednesday). This (its Monday’s petition) wasn’t correctly filed. We weren’t give adequate time to respond to the section 206 (1) notice," C Parthasarathy, chairman, Karvy told this publication. SEBI barred it from opening new trading accounts based on an NSE inquiry alleging the brokerage raised money pledging clients’ shares.