Nagarjuna Finance promoter, director held in Hyderabad

16 December 2008

Hyderabad police have arrested K S Raju and P K Mahadevan, original promoter and director respectively of Nagarjuna Finance Limited, for allegedly defaulting on payments to depositors of NFL, a non-banking financial institution promoted by the group.

They were arrested under section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act, R S Praveen Kumar, DCP, Hyderabad detective department, said, adding, nearly 700 warrants issued by courts across the country were pending against the arrested.

NFL, incorporated as a non-banking financial institution in 1982, collected deposits to the tune of Rs98.3 crore from about 85,160 depositors during 1997-98. Out of them, the company failed to repay deposits of 16,122 depositors amounting to Rs23.02 crore, matured on 31 December 1999.

Following this, depositors lodged complaints with the police while the company management secured an order from the high court, staying proceedings against them by the police.

The depositors had sought return of about Rs98 crore, but NFL changed hands in 2000. The company announced that it had been acquired by Mumbai-based Mahalakshmi Factoring Services Limited (MFSL) and hence was absolved of repaying the depositors.

LVV Iyer, one of the directors of NFL, filed a plea before the Company Law Board (CLB) Southern Region in Chennai seeking 12-48 months' time for repayment of the deposits. CLB, in its order in February 2002, proposed a scheme for repayment at the rate of 12.5 per cent per annum over a period of 12-48 months.