Karvy Stock Broking Limited gets two months to reply to PMLA notice
HYDERABAD: Justice K Lakshman of the Telangana High Court has given Karvy Stock Broking Limited (KSBL) and nine others, two months’ time to file their explanation to the show cause notice issued by the Adjudicating Authority under the Prevention of Money Laundering Act (PMLA) 2002.
It was made clear that the petitioners in both writ petitions shall not seek further extension of time and shall submit explanations within two months, keeping in mind the object and legislative intent of Section 8 of the Act, that the adjudication process is time-bound.
The CCS in Hyderabad lodged a complaint against KSBL and its directors in 2021, against Karvy and its director for violations under Section 420 of the IPC. They are accused of failing to repay debts that have been categorised as fraudulent accounts. The ED soon launched an investigation.
Several additional FIRs filed in connection with the case were also taken into consideration. C Parthasarathy, chairman of the Karvy Group of Companies was held in judicial custody in Hyderabad’s Chanchalguda Central Jail for multiple offences from August 19, 2021 to May 25, 2022.
According to the ED’s inquiry, the loans outstanding in KSBL’s accounts as on March 31, 2020, were `1705.23 crore. KSBL unlawfully secured these loans from banks/financial institutions by claiming clients’ shares as its own. Furthermore, KSBL unlawfully transferred shares of completely paid-up clients/ who did not owe any payments to the firm and pledged them with banks/financial institutions. It amounted to the flagrant abuse of the client’s Power of Attorney granted to the petitioner.
The ED filed the original complaint with the adjudicating authority which issued a show cause notice on April 22, 2022. Petitioners, in this case, filed a petition seeking an extension of time to respond to the show cause notice. This court granted the petitioners a one-month extension, which ended on July 27, 2022. As a result, the petitioners filed the current writ petitions requesting an extension of two months’ time to respond to the said show cause notice, as well as an exemption from the computation of 180 days under Se-ction 5(3) of the PMLA Act. After hearing both sides, the court eventually gave both parties two months to provide an explanation/response to the show cause notice.