Hyderabad: In a major setback to Margadarsi Financiers, owned by the late media baron Ch Ramoji Rao, the Reserve Bank of India informed the Telangana High Court that the entity was liable for prosecution as it had collected funds from public in violation of the RBI Act.
The banking regulator also opposed the quash petitions filed by Margadarsi and Ramoji Rao against cases filed way back in 2008 by the then Y.S. Rajasekhar Reddy-led state government. The RBI, in a counter affidavit filed a few days ago, stated, “in a catena of judgments, the Telangana High Court as well as the Supreme Court have held that once (the) acts of petitioners prima facie attract the ingredients of the alleged offences, quash petition is liable to be dismissed.”
Following the apex court orders, the Telangana High Court made the RBI a party in the case on July 3 and asked the regulator to file a counter.
Trouble for Margadarsi started with former Congress MP Vundavilli Arun Kumar lodging a complaint against Margadarsi Financiers for collecting funds from public which he said was against the RBI Act which prohibited a Hindu Undivided Family (HUF) entity from carrying out such financial activity.
The government booked a case against Margadarsi and Ramoji Rao, and CC No. 540 of 2008 was under trial before the First Additional Chief Metropolitan Magistrate, Hyderabad, since then. The High Court of Andhra Pradesh on the last day of its existence before it was bifurcated in 2018 let off Ramoji Rao and Margadarsi, quashing all proceedings in the case.
The HC observed that no depositor had come forward with a complaint against Margadarsi and that, in pursuance of the allegations made in the complaint, the company had taken up the exercise of paying back the deposits. “It can be understood that there was no malafide intention on the part of the petitioners to commit any offence with regard to the deposits collected from the depositors,” the HC observed.
However, the Supreme Court, dealing with a special leave petition filed by Arun Kumar, remitted the case back to the Telangana High Court for fresh hearing and asked the High Court to make the RBI and state governments of both AP and Telangana as respondents, if they were willing.
The RBI categorically said that Margadarsi could not be permitted to bypass the process of law by contending that the RBI Act, especially Section 45 (S), is not applicable to it since the term HUF was not expressly included in the Act. The HUF cannot assert an absolute right to accept deposits from the public by contending that Section 45 (S) was not applicable to it.
“The HC needs to suppress the mischief by taking into consideration that the HUF by carrying on the business in the name of Margadarsi Financiers falls within the scope of association of individuals as mentioned in 45 (S) of the RBI Act and as such prohibited from accepting deposits from public,” the RBI stated.
