The Karnataka High Court has refused to quash criminal proceedings initiated by the Serious Fraud Investigation Office (SFIO) against Razorpay directors Harshil Mathur and Shashank Kumar over alleged lapses in merchant verification and due diligence. Justice M. Nagaprasanna held that the issues raised by the directors involve disputed questions of fact that cannot be examined at the stage of quashing proceedings.
Background
The proceedings originated from an SFIO investigation into 33 companies, including Mad Elephant Network Technology Private Limited (MENTPL), which was allegedly involved in digital lending operations through third-party platforms. The investigation concerned allegations of coercive loan recovery practices and wrongful gains of approximately Rs. 56.63 crore.
According to the complaint, Razorpay had processed approximately Rs. 320 crore in transactions linked to MENTPL. The SFIO alleged deficiencies in merchant onboarding, KYC verification and transaction monitoring. Harshil Mathur and Shashank Kumar, who serve as directors of Razorpay, were named as accused Nos. 8 and 9 under Section 166 of the Companies Act, 2013.
The directors approached the High Court seeking to quash the complaint, cognizance order and subsequent criminal proceedings.
The petitioners argued that Razorpay was not among the companies specifically named in the Central Government's investigation order. They also contended that negligence in KYC verification could not, by itself, establish criminal liability against its directors.
Rejecting the request for interference at this stage, the Court observed that the extent of the directors' responsibilities and their compliance with due diligence requirements would require examination during trial.
The Court stated:
"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."
Justice Nagaprasanna further emphasised that the High Court cannot conduct a mini-trial while exercising its jurisdiction to quash criminal proceedings.
The Court observed:
"It is by now too well settled that this Court while exercising its jurisdiction under Section 528 of the BNSS cannot embark upon a mini-trial and adjudicate upon disputed questions of fact by entering into the merits of allegations."
Finding no justification for interference at the present stage, the Karnataka High Court rejected the writ petition filed by Harshil Mathur and Shashank Kumar.
Consequently, the criminal proceedings initiated against them by the SFIO will continue in accordance with law.
Case Details
Case Title: Harshil Mathur & Anr. v. Union of India
Case Number: Writ Petition No. 16078 of 2026 (GM-RES)
Judge: Justice M. Nagaprasanna
Decision Date: 04 November 2026
