Hyderabad: The Telangana High Court on Friday, February 7, reprimanded the Reserve Bank of India (RBI) for not filing a counter affidavit in the Margadarsi case. It set the next hearing for February 14.
The court stated the Supreme Court’s order for hearing in this case at the earliest. Former MP Undavalli Arunkumar informed the court that despite an order issued in October 2024 to include his name in the cause list, the registry failed to implement it. Acknowledging the concern, the bench reiterated its directive to the registry to comply with the order.
Previously, the High Court had dismissed a complaint filed in the Nampally court seeking action against Margadarsi and its owner late Ramoji Rao, under the Depositors Protection Act for alleged legal violations.
Telangana HC calls for claims from investors in Margadarsi case
Challenging the ruling, Arunkumar and the Andhra Pradesh government had approached the Supreme Court. At the same time, Margadarsi and Ramoji Rao had also filed a petition in the apex court objecting to specific parts of the judgment.
SC overturns HC order in Margadarsi case
On April 9, 2024, the Supreme Court overturned the High Court’s decision, stating that the facts related to the collection of deposits needed to be ascertained. The court ruled that all parties, including Arunkumar and the AP government, must be heard.
In the Telangana High Court, a bench comprising Justice Shyam Koshy and Justice K Sujana took up the matter on February 7. Senior advocate Siddhartha Ludra, Arunkumar, and senior advocate L Ravichander participated virtually, while AP special government pleader Rajeshwar Reddy and Telangana public prosecutor Palle Nageshwar Rao appeared in person.
During the hearing, Ravichander pointed out RBI’s request for additional time to file a counter, but the court rejected the request, setting a one-week deadline for submission.
In August 2024 The Telangana High Court directed its registry to publish a notice inviting claims or objections from bonafide investors of Margadarsi Financiers. The notice will be published in English, Hindi and Telugu newspapers.
This order was issued by a division bench comprising Justice Sujoy Paul and Justice Namavarapu Rajeshwar Rao while hearing criminal petitions filed in 2011 by Margadarsi Financiers and its late chairman Ramoji Rao.
The petitions sought a stay on criminal prosecution against them for allegedly collecting deposits from investors in violation of RBI guidelines.
Origin of the Margadarsi case
The Margadarsi case dates back to 2008 when former Congress MP Undavalli Arun Kumar filed a complaint that led the then united Andhra Pradesh government to initiate criminal prosecution against Margadarsi Financiers, a move later upheld by a magistrate court.
Former MP, Arun Kumar alleged that Margadarsi Financiers collected deposits from the public amounting to Rs 2,610 crores as of March 31, 2006.
He argued that the Hindu Undivided Family (HUF) structure, being an unincorporated association, is not recognized as a juristic person and therefore prohibited from collecting deposits under Section 45S(1) of the RBI Act.
On December 31, 2018, the Hyderabad High Court dismissed the criminal prosecution against Margadarsi Financiers and its chairman, Ramoji Rao.
Arun Kumar challenged this decision in the Supreme Court, which found issues with the High Court’s ruling and sent the case back to the Telangana High Court for a fresh hearing.
