HC stays probe into Karvy affairs

Matter to be heard again on September 30

Telangana High Court on Monday passed interim orders staying the ongoing probe into the affairs of Karvy Stock Broking Limited (KSBL) by the Union government’s Serious Fraud Investigation Office (SFIO).

A bench of Chief Justice Raghvendra Singh Chauhan and Justice B. Vijaysen Reddy passed this direction after hearing an appeal filed by KSBL challenging a single judge order which upheld the probe by the SFIO. The bench issued notices to Secretary, Ministry of Corporate Affairs, the Ministry’s Director General and Regional Director in Hyderabad and the Registrar of Companies-Telangana.

The bench instructed Assistant Solicitor General N. Rajeshwar Rao to present to the court the documents, letters and reports based on which the SFIO undertook a probe into affairs of KSBL. SFIO launched investigation into the allegations that KSBL raised loans by pledging assets of its clients and diverted the funds thus secured into realty sector.

KSBL moved the HC questioning the action of SFIO’s probe. A single judge declined to pass any order stalling the probe, following which the company filed an appeal before the bench headed by the CJ.

Senior counsel S. Niranjan Reddy representing KSBL contended that due procedure was not followed before undertaking the probe. Under the Companies Act, SFIO should have served notice to KSBL under section 206 (4) of the Act, he said. The matter would be heard again on September 30.