The Enforcement Directorate (ED) has said that it has attached properties worth Rs 134.02 crore in the form of 1,000 non-convertible redeemable preference shares of face value Rs 200 each of KFin Technologies Ltd (KFintech) held in the name of son of C Parthasarathy, the CMD of Karvy Stock Broking Ltd, in a money laundering case.
In a statement released on Thursday, October 26, the ED said that the properties worth Rs 134.02 were attached in a case registered under the Prevention of Money Laundering Act (PMLA), 2002, on October 23. The financial probe agency had registered a case based on FIRs registered by the CCS Hyderabad Police, alleging that KSBL availed loans by illegally pledging its clients' shares worth about Rs 2,800 crore and did not repay the said loans which were subsequently declared as NPA and fraud accounts.
It said that the loan funds were diverted to related companies like – Karvy Data Management Services Ltd., Karvy Realty India Ltd., etc. which was otherwise than for the stated purpose and the diverted loan funds were routed via multiple defunct NBFCs to Karvy Financial Services Limited (an NBFC of the Karvy Group) to wash its bad debt accounts or NPAs.
"ED probe found that Parthasarathy had special privileges and rights to subscribe to additional equity shares of KFin Technologies Ltd. (Kfintech) at a pre-determined price as per the Shareholders Agreement dated August 3, 2017. In consideration for the termination of the Shareholders Agreement and extinguishment of all such rights, KFintech allotted 1,000 non-convertible redeemable preference shares in the name of Adhiraj Parthasarathy, son of C Parthasarathy, at par on October 25, 2021," the agency said. It added that the actual redemption premium or termination fee agreed upon was Rs 164 crore. "However, the amount was decreased by Rs 30 crore as Kfintech discovered certain unauthorised transfers of shares of Petronet LNG Limited to the demat accounts of KSBL and Karvy Consultants Limited (KCL) thus triggering the indemnity payout clause of the said mutual agreement. Hence, these shares were redeemable after a period of two years at a net redemption premium of Rs 134.02 crore," the ED said.
The ED probe also found that the said issuance of Redeemable Preference Shares is in lieu of the rights and privileges enjoyed by Parthasarathy in Kfintech and thus he has the primary right or ownership of the said consideration received. "Parthasarathy and his concerns had made an arrangement that the said consideration from KFintech is taken in the name of Adhiraj Parthasarathy as he is not an accused in the FIRs. Further, the said property in the form of Redeemable Preference Shares was concealed by Adhiraj Parthasarathy and was not deliberately disclosed in his submissions made before the ED during the course of the investigation," the agency said. The ED has so far attached assets worth Rs 2,229.56 crore.
However Adhiraj denied the allegations made by the ED and stated that the shares of Rs 134 crores were allotted to him in a legitimate manner. He alleged that the investigating officer, Shiv Kumar Gupta, attempted to portray it as an illegal attachment. “ED allegation against me is that I ‘concealed’ the existence of these shares. How can someone conceal 134 crores worth of shares in a publicly listed company?” he questioned in a statement.
He also stated that the existence of these shares was disclosed to the Enforcement Directorate in writing on the date they were issued, October 25, 2021, with permission and approval. The details were also disclosed to SEBI, stock exchanges, investors of KFintech, and banks, including HDFC and ICICI. The details of these holdings were published online more than a year ago.
“My written submission to the Investigating Officer was made on October 3, 2021, before the shares were allotted on October 25, 2021, with their explicit approval. When I met the IO, Mr. Gupta, for my oral statement on December 17, 2021, he seemed more interested in discussing irrelevant details about my personal life and made no inquiries about these shares. The ED was informed of these shares at every stage of the transaction, and there were no objections raised. The arbitrary attachment of these shares has held up a legitimate approved transaction, which will be contested legally,” Adhiraj said in his statement
With inputs from IANS