HYDERABAD: In a significant development, the Reserve Bank of India (RBI) has informed the Telangana High Court that Margadarsi Financiers, owned by the late media mogul Ch Ramoji Rao, is liable for prosecution. The RBI said that the company violated the RBI Act by collecting funds from the public, an activity prohibited for a Hindu Undivided Family (HUF) under the current regulations.
The banking regulator also opposed the quash petitions filed by Margadarsi and Ramoji Rao, challenging the cases initiated in 2008 by the then Andhra Pradesh government, led by Y S Rajasekhara Reddy. In a recent counter affidavit, the RBI referenced multiple judgments from the Telangana High Court and the Supreme Court, arguing that the petitions should be dismissed because the alleged actions of the petitioners prima facie meet the criteria for the offences in question.
This case traces its origin to a complaint lodged by former Congress MP Vundavalli Arun Kumar, who accused Margadarsi Financiers of violating the RBI Act by collecting deposits from the public. In response, the state government filed a case against Margadarsi and Ramoji Rao, which has been under trial in the First Additional Chief Metropolitan Magistrate Court, Hyderabad, since 2008.
Although the Andhra Pradesh High Court quashed all proceedings against Ramoji Rao and Margadarsi in 2018, citing the absence of complaints from depositors and acknowledging the company’s efforts to repay the deposits, the Supreme Court later intervened.
Following a special leave petition by Arun Kumar, the apex court reverted the case back to the Telangana High Court for a fresh hearing and ordered the inclusion of the RBI and the state governments of Andhra Pradesh and Telangana as respondents.
In its recent response, the RBI emphasised that Margadarsi cannot evade legal scrutiny by arguing that the RBI Act, specifically Section 45(S), does not explicitly apply to HUFs. The RBI argued that Margadarsi, by operating under an HUF, should be classified as an “association of individuals” under Section 45(S) and, therefore, is prohibited from accepting public deposits.