Margadarsi case: Why are you evading disclosure of depositors’ info? SC asks Ramoji

NEW DELHI: In a significant development, the Supreme Court on Tuesday directed Margadarsi Chit Funds, owned by media baron and business tycoon Cherukuri Ramoji Rao, to disclose the details of its depositors. The apex court made some significant observations while hearing a petition filed by former MP Undavalli Arun Kumar over alleged irregularities by Margadarsi Chit Funds.

During the course of the hearing, petitioner Arun Kumar, who himself presented the arguments, wondered why Margadarsi was not disclosing the details of its depositors. He wanted to know as to what stopped the chits company from revealing the details of its depositors when it claimed to have made all the payments to them.

To this, the division bench of the Supreme Court, comprising Justice Surya Kumar and Justice J B Pardiwala, reportedly asked the counsel for the respondent if the payments to the depositors were being made promptly. The respondent’s counsel in turn informed the apex court that all the payments are promptly made to the depositors. To this, the Supreme Court reportedly questioned what was the total investment in Margadarsi and the total payments made to the depositors.

The division bench also concurred with the contention of the petitioner Undavalli Arun Kumar. It asked the respondent’s counsel as to why they were maintaining secrecy over its depositors. “Why are you not disclosing the details of your depositors when you are making prompt payments to them?,” it questioned.

In another interesting observation, the Supreme Court felt that there was a conflict in the claims made by Margadarsi on its status which, it felt, needs to be cleared in due course. Margadarsi is touted to be a business promoted by a Hindu Undivided Family (HUF) on one side and also shown as a proprietary concern on the other side. “This conflict needs to be cleared,” the Supreme Court reportedly observed.

As per the guidelines of the Reserve Bank of India (RBI), it is illegal for an entity listed under HUF to collect chit deposits from its subscribers.

Speaking to the media later, petitioner and advocate Undavalli Arun Kumar termed the Supreme Court’s latest direction as an crucial turn in his 17-year-long legal battle against Margadarsi. He claimed that the Supreme Court had directed Ramoji Rao’s Margadarsi to disclose the details of its chit fund depositors.

He questioned Margadarsi as to why they were hiding this information from the public domain for the last several years. “Where did the Rs 26,000 crore deposits come from? How many chit subscribers were repaid with their deposited money? Were these payments made through cheques or in other ways? Margadarsi will now have to furnish all these details to the court. They also need to explain why the company has been referred to as a HUF business at one place and as a proprietary concern at another instance,” Undavalli Arun Kumar felt.

The former Congress leader has been waging a legal battle for more than a decade now against the alleged irregularities by Margadarsi Finances. His main charge is that Margadarsi Chit Fund Private Limited (MCFPL), owned by Ramoji Rao, indulged in irregularities by illegally diverting funds from chit funds. He alleges that Ramoji Rao’s MCFPL invested the deposits collected from its chit funds subscribers into mutual funds and other subsidiaries.