C Parthasarthy, the Chairman of Karvy Stock Broking Limited was arrested on Thursday, August 19, by the Hyderabad police for allegedly defaulting on a loan taken from IndusInd Bank. The Central Crime Station (CCS) police made the arrest after registering a case against Karvy Stock Broking Limited (KSBL) on the basis of a complaint filed by the bank.

Parthasarthy will be produced before a city court later in the day, a police official said. The IndusInd bank had granted a loan of Rs 185 crore to KSBL in 2019 on depositing the securities and guarantees to the bank, but the company failed to repay. It was alleged that the KSBL illegally transferred Rs 138 crore to other companies. Two other banks had also lodged complaints against KSBL, but for now, the police have taken action only in connection with the case registered based on IndusInd Bank's complaint.

The Joint Commissioner of Police, Avinash Mohanty told Times of India that Parthasarathy and others accused in the case allegedly pledged the shares of their clients to avail loans from banks. The loan amounts were diverted by the accused to other bank accounts and subsequently defaulted. 

Meanwhile, HDFC Bank, alleged that KSBL defaulted on the loan taken in 2019. The stockbroking company had taken a loan of Rs 350 crore against shares but only repaid Rs 142 crore. The bank said the remaining balance loan amount of Rs 208 with Rs 38 crore interest remains unpaid.

In November 2019, the Securities and Exchange Board of India (SEBI) banned KSBL over client defaults worth Rs 2,000 crore. The company was banned from taking on new clients and executing trades for existing customers.

This followed an investigation by the National Stock Exchange (NSE), which found that Karvy had allegedly sold client stocks pledged with it through associated entities. The regulator had told depositories not to act upon any instructions by Karvy Stock Broking on the basis of powers of attorney given to the brokerage house, in order to prevent further misuse of client securities.