The SFIO Case Against Razorpay Directors Harshil Mathur and Shashank Kumar survives, with the Karnataka High Court telling them “It is for the petitioners to come out clean in a full-blown trial” and holding that whether they discharged their fiduciary duties in onboarding an allegedly Chinese-controlled lending platform is a disputed question of fact.
Bengaluru: A complaint alleging lapses in Razorpay’s onboarding of a lending platform will be tested at trial, after the Karnataka High Court dismissed a writ petition by Razorpay’s Whole Time Director Harshil Mathur and Managing Director Shashank Kumar seeking to quash the Serious Fraud Investigation Office (SFIO) complaint that names them as accused in a case over a network of shell companies allegedly controlled by Chinese entities and used for digital lending [Harshil Mathur & Anr. v. Union of India].
After reserving the matter, Justice M Nagaprasanna pronounced the order on November 4, 2026. The Court held that the case was at a nascent stage and was “shrouded with seriously disputed questions of facts”, which could not be decided in proceedings under Section 528 of the Bharatiya Nagarik Suraksha Sanhita, 2023.
A disputed question of fact
The Court noted that Section 212(14) of the Companies Act allows the Centre to direct prosecution not only of the company investigated but also of any other person directly or indirectly connected with its affairs. On the directors’ fiduciary duty, it held:
“Whether such fiduciary duty is complied with by the petitioners or whether due-diligence is done by the petitioners or otherwise is a disputed question of fact, which can only be considered at the stage of trial.”
The complaint behind the petition
It began with a confidential report of the Registrar of Companies, which is said to have uncovered a network of shell companies with dummy directors created by Jilian Consultants India Private Limited (JCIPL). By an order dated September 9, 2022, the Centre directed an SFIO investigation under Section 212 of the Companies Act, 2013 into JCIPL and 32 other companies. The SFIO placed its report before the Government on July 31, 2024, and that report forms the basis of the complaint.
According to the complaint, Mad Elephant Network Technology Private Limited (MENTPL), incorporated on November 15, 2019, through JCIPL, had dummy directors and was controlled by Chinese entities. It tied up with a non-banking financial company, X10 Financial Services Limited, as a service provider for lending through digital platforms and mobile apps. The complaint alleges that MENTPL used predatory and coercive recovery methods and made wrongful gains of Rs 56.63 crore.
Mathur and Kumar are arrayed as accused Nos. 8 and 9 in Special C. No. 324 of 2026 before the LIX Additional City Civil and Sessions Judge, Bengaluru, where cognizance was taken on March 5, 2026. The allegations against them concern lapses in merchant onboarding by Razorpay, including Know Your Customer (KYC) verification of MENTPL, absence of due diligence and failure to monitor its transactions, and they are charged under Section 166 of the Companies Act for failing to discharge their duties as directors.
What each side argued
Senior Advocate Sandesh J Chouta, for the directors, argued that the SFIO had to confine itself to JCIPL and its shell companies, that KYC duties lay with banks and not intermediaries such as Razorpay, and that Razorpay had been singled out while similarly placed payment intermediaries were not named. He contended that even if Razorpay had been negligent, its directors could not be held vicariously liable, and also raised a plea of limitation.
Additional Solicitor General K Arvind Kamath, for the Union of India, submitted that Razorpay acted as a conduit for approximately Rs 320 crore of MENTPL’s transactions, and that the allegations warranted a trial.
No mini-trial at the quashing stage
On the argument that Razorpay itself had not been made a party, the Court said the role of Razorpay “could come about” as the matter is taken forward. Relying on Supreme Court rulings including Kaptan Singh v. State of Uttar Pradesh, CBI v. Aryan Singh and Neeharika Infrastructure, it reiterated that a High Court cannot hold a mini-trial at the quashing stage, and concluded:
“It is for the petitioners to come out clean in a full-blown trial. I do not find any warrant of interference at this juncture.”
Why the order matters
The ruling is significant for payment aggregators and their boards. Their defence that KYC obligations rest with banks, and that intermediaries are only pipes for payments, will now have to be tested on evidence at trial rather than settled at the threshold. The order also reads Section 212(14) of the Companies Act broadly enough to reach persons connected with the affairs of an investigated company, even if their own company was not among those originally probed.
The order does not decide whether the directors are guilty. The allegations in the SFIO complaint are untested, the High Court has expressed no view on their merits, and Mathur and Kumar are entitled to the presumption of innocence. All their contentions, including on limitation and vicarious liability, remain open before the trial court.
Case Title: Harshil Mathur & Anr. v. Union of India, Ministry of Corporate Affairs (SFIO) [Writ Petition No. 16078 of 2026 (GM-RES)]
Bench: Justice M Nagaprasanna, Karnataka High Court
Date of Order: November 4, 2026
Appearances: Senior Advocate Sandesh J Chouta with Advocate Abhishek Kumar for the petitioners; ASG K Arvind Kamath with CGC Anuparna Bordoloi for the respondent