The Supreme Court on Monday issued notice in a matter arising from a 2008 criminal complaint alleging illegal deposit collection and diversion of public funds by Margadarsi Financiers. The Bench of Justice P. S. Narasimha and Justice MM Sundresh issued notices to the States of Telangana and Andhra Pradesh, the Reserve Bank of India (RBI), and Margadarsi Financiers.

During the hearing, Senior Advocate Mukul Rohatgi submitted that the proceedings ought to be closed in view of the death of Ramoji Rao, the proprietor of the firm (ETV and Margadarsi Financiers). However, Justice P. S. Narasimha observed that the entity Margadarsi Financiers continues to operate despite Rao’s demise. To this, Mr Rohatagi stated that an affidavit would be filed to demonstrate that dues owed to depositors have already been repaid.

The case arose from a Special Leave Petition (SLP) challenging the Telangana High Court’s August 4, 2025, judgment that quashed criminal proceedings against Margadarsi Financiers in an alleged financial fraud case involving public deposits.

The petitioner contended that the High Court erred in terminating proceedings despite the investigation being incomplete, allowing the firm, which was accused of illegally collecting large sums from the public in violation of the RBI Act, to escape scrutiny following the death of its proprietor. It is argued that this approach undermines established principles of criminal law and enables evasion of liability in serious economic offences.

The plea further alleged non-compliance with the Supreme Court’s April 9, 2024, remand order, which had directed fresh consideration after inviting claims from bona fide investors. It also claims that the High Court ignored the mandatory penalty framework under Section 58B(5A) of the RBI Act, and adopted a “pedantic” approach by assessing the complaint as if it were exhaustive evidence, despite the investigation being ongoing.

Highlighting procedural lapses, the petitioner stated that issues such as abatement of proceedings and vicarious liability should have been left to trial. It also argued that quashing the complaint prematurely has stalled the investigation into a broader conspiracy involving the misuse of public funds by the group entities.

Appearances

For Petitioner: K. Parameshwar, Senior Advocate, Ramesh Allanki, advocate; Aruna Gupta, AoR

For respondent: Sr. Adv Mukul  Rohatgi