Karnataka High Court refuses to quash SFIO case against Razorpay's Harshil Mathur and Shashank Kumar over a loan app merchant

The Karnataka High Court has dismissed a petition by Razorpay's whole time director Harshil Mathur and managing director Shashank Kumar seeking to quash a Serious Fraud Investigation Office (SFIO) complaint that names them as accused. Justice M Nagaprasanna passed the order on November 4, 2026, and it was reported this week by Bar and Bench, Inc42 and LawChakra. The case will now continue before a special court in Bengaluru, where cognizance was taken on March 5, 2026, according to LawChakra's reading of the order.

The case grows out of a much larger probe. According to the court order, a confidential report by the Registrar of Companies uncovered a network of shell companies with dummy directors created by Jilian Consultants India Private Limited, and in September 2022 the Centre ordered the SFIO to investigate it and 32 other companies. One of them, Mad Elephant Network Technology Private Limited, is alleged in the complaint to have been controlled by Chinese entities, to have worked with an NBFC as a service provider for app based lending, and to have used predatory and coercive recovery methods. Razorpay was the payment aggregator for that business. The allegations against Mathur and Kumar concern lapses in merchant onboarding, KYC checks on the lending firm, due diligence and monitoring of its transactions, and they are charged under Section 166 of the Companies Act over their duties as directors.

The directors' lawyers argued, as reported by LawChakra, that KYC duties sit with banks rather than intermediaries like Razorpay, that other payment intermediaries in similar positions were not named, and that directors cannot be held vicariously liable for a company's negligence. The court did not accept that this could be settled at the quashing stage. It held that whether the directors met their fiduciary duty and did due diligence is a disputed question of fact that can only be considered at trial, and that the Companies Act allows prosecution of anyone directly or indirectly connected with the affairs of a company under investigation.

The order is not a finding of guilt, and the directors can contest the allegations at trial. Its reach goes beyond one company, though. By letting the case against two directors of a payment aggregator go to trial over how a merchant was onboarded and checked, the court has made merchant KYC and transaction monitoring a question of personal accountability at the top, not just a compliance task. The timing is awkward for Razorpay: bharat.digital reported earlier this month that it has received SEBI approval for its planned IPO, according to Moneycontrol, The Economic Times and The Times of India.