The Hindu Business Line : Failure to repay depositors — MCA moves against Nagarjuna Chairman

THE Ministry of Company Affairs (MCA), through the Registrar of Companies (RoC) here, has moved the Economic Offences Court against Mr K.S. Raju, Chairman of Nagarjuna group and original promoter of Nagarjuna Finance Ltd (NFL), other directors responsible for raising public deposits, and the current NFL management personnel for their failure to repay the depositors.

Apart from seeking the Court to punish all defaulters accused in the petition, the RoC has also urged to direct the accused to repay the depositors as per the terms of orders earlier passed by the Company Law Board (CLB), Southern Bench, along with contractual interest and damages.

However, disowning himself and Nagarjuna group the responsibility of repaying depositors, Mr Raju told reporters on Saturday that since the group had divested its equity holding in NFL in favour of the Mumbai-based Mahalakshmi Factoring Services Ltd (MFSL) in September 2000, the onus now lies on MFSL to pay dues by way of realising receivables.

Mr Raju said the MFSL management still has assets worth over Rs 90 crore of NFL under its control compared to the outstanding dues of around Rs 40 crore to depositors. "Accordingly, we have requested the AP High Court to appoint a liquidator who could take control of assets of NFL from MFSL management for repaying the depositors," he said. On the other hand, the RoC maintained that such a transaction does not bind the depositors and that the earlier management cannot evade its legal obligation to repay depositors. Stating that the current management of Nagarjuna Finance also miserably failed to repay amounts to depositors, the RoC said all the accused were individually and jointly responsible for the payment of amounts to depositors.

In its petition, the RoC submitted to the Economic Offences Court that the company had not only defaulted in repayment of amounts to depositors, but also failed to comply with the CLB's directives on the deferred repayment schedule.

As per the status report available with the RoC, the new management of NFL could repay only Rs 54.8 crore as at December 2003 as against the outstanding dues of Rs 98.37 crore. According to it, in spite of the extension granted by the CLB and repeated assurances made by Nagarjuna group companies, many depositors did not receive their money.

The RoC has also submitted to the Court that the MoU entered into between the Nagarjuna group promoters and MFSL does not grant the promoters any indemnity from criminal proceedings or proceedings in contempt nature.

Expressing doubts over the route through which Nagajuna Finance was taken over by MFSL, the RoC said it was not known whether such a change of management was done with the consent of the shareholders of NFL or with concurrence of the depositors. "Hence, the change of management through the MoU shall not or cannot absolve the statutory responsibility or onerous liability imposed on the accused by the CLB."

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