Margadarsi Financiers in the Dock: RBI Declares Fund Collection Illegal

Once again, Margadarsi's financial fraud is exposed. In a significant blow to Margadarsi Financiers, owned by the late Ch Ramoji Rao, the Reserve Bank of India (RBI) informed the Telangana High Court that Margadarsi Financiers had violated the RBI Act by collecting funds from the public, making the entity liable for prosecution. The banking regulator also opposed the petitions filed by Margadarsi and Ramoji Rao, which sought to quash cases initiated in 2008 by the YS Rajasekhar Reddy-led state government.

In its recent counter affidavit, the RBI highlighted that both the Telangana High Court and the Supreme Court have previously ruled that when the actions of a petitioner appear to meet the criteria for the alleged offenses, any petition to quash the case should be dismissed.

The legal troubles for Margadarsi began when former Congress MP Vundavalli Arun Kumar filed a complaint against the company, accusing it of illegally collecting funds from the public, a practice prohibited by the RBI Act, particularly for Hindu Undivided Family (HUF) entities. Despite the initial dismissal of the case by the Andhra Pradesh High Court in 2018, which ruled in favor of Margadarsi, the Supreme Court later intervened. The apex court remitted the case back to the Telangana High Court, ordering fresh hearings and making the RBI a party to the case.

The RBI has strongly argued against Margadarsi’s claims that the RBI Act does not apply to it because the term "HUF" is not explicitly included in the Act. The regulator emphasized that Margadarsi Financiers, operating under the HUF, should be considered an "association of individuals" and is therefore prohibited from accepting public deposits under Section 45(S) of the RBI Act.

The ongoing legal battle raises serious questions about Margadarsi Financiers’ compliance with financial regulations and its accountability under the law. The company’s attempt to bypass legal scrutiny by exploiting perceived loopholes in the RBI Act has drawn sharp criticism from the RBI, adding to the entity's mounting legal woes.