Karvy suffers setback as Telangana high court upholds SFIO probe

HYDERABAD: Karvy Stock Broking Limited (KSBL) suffered a blow on Tuesday when the Telangana high court refused to stall a probe ordered by the Union ministry of corporate affairs into the alleged irregularities in Karvy and its group of companies, along with nine other firms connected to it.
Justice Abhinand Kumar Shavili dismissed a plea filed by KSBL against a probe by the Serious Fraud Investigation Office (SFIO), which works under the corporate affairs ministry.
While Karvy counsel argued that it was unlawful to order an SFIO probe under section 212 without following sections 206 and 208, the judge did not agree with him after the Centre’s counsel brought to the notice of the court the probe done by Registrar of Companies (ROC), Hyderabad, under section 208 of the Companies Act. “In fact, it was the ROC which had recommended a thorough probe into the affairs of Karvy,” he contended.
The judge brushed aside the contention that the officials did not follow an earlier directive from the high court that ordered them to give Karvy a personal hearing before resorting to any final decision.
In fact, the probe was already ordered and the same was informed to the high court by assistant solicitor general (ASG) Namavarapu Rajeswara Rao. “We have power to do so under section 212 of the Companies Act,” he said.
ROC conducted a probe and submitted an inquiry report on February 24 under section 208, he said. Along with Karvy and its group companies, Karvy Consultants, Wizard Insurance Services, Zenith Insurance Services, Buoyant Insurance Services, Nova Wealth Management Services, Classic Wealth Management Services, Champion Insurance Services and Pelican Wealth Services will have to face the SFIO probe, he argued.
The ASG further said the Centre has got powers to order a probe into such matters. After hearing this, the judge dismissed Karvy’s plea, thereby paving the way for an SFIO probe into the affairs of Karvy and its group of firms.