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RBF Nidhi: HC directive for corrective steps

Our Legal Correspondent

The Chief Judge, Court of Small Cases, has also been directed to dispose of all the attachment applications within a period of three months.

Chennai , July 19

IN a fresh bid to provide succour to the lakhs of depositors of the Chennai-based RBF Nidhi Ltd, a non-banking financial company, the Madras High Court has directed the Reserve Bank of India and the Economic Offences Wing to take "effective and coercive steps" to collect the monies due to the company from mega borrowers and arrest the accused involved in the criminal offence.

Mr Justice A. Ramamurthi, who heard a batch of writ petitions from various persons and institutions concerned, including the Anna Nagar RBF Depositors Association, ordered that the passports of all the accused be impounded and directed the investigating authorities such as the Economic Offences Wing to ensure that none of the accused left the country.

The main writ petition of the association prayed for a writ of mandamus directing respondents the Reserve Bank of India (Department of Non-Banking Supervision, Chennai) and the Deputy Superintendent of Police, Economic Offences Wing II, Chennai to take appropriate civil and criminal action against the former directors of RBF Nidhi Ltd and the Chairman of Balaji Group of Companies, Chennai (Mr Srinivasalu Reddy), under the relevant provisions of the Reserve Bank of India Act, 1934, read with the relevant provisions of the IPC and the Criminal Law Amendment Ordinance 38 of 1994 on the basis of the complaint given by them on January 8, 2000, and February 2, 2001.

The association alleged that due to the mismanagement of the directors of RBF Nidhi— Mr S. Subramanian, Ms S. Rajalakshmi, Mr S Murugabharathi, Ms S. Vasthala and Mr S. Sankarakrishnan— a total deposit of Rs 400 crore was not paid back to the depositors, numbering 1,90,000. These persons had committed acts of criminal misappropriation, cheating, falsification of accounts, forgery of valuable security, fabrication of records and criminal conspiracy, the association alleged.

RBI submitted that it was not a party to any of the alleged deposit transactions. The petition was not maintainable either in law or on facts. There was no disclosure of any evidence regarding specific violation of any of the provisions of the RBI Act. The Economic Offences Wing submitted that it had already filed the investigation report.

The Judge, after hearing the counsels of the various petitioners and respondents, issued the following directions to the Economic Offences Wing and RBF Nidhi Ltd to take effective and coercive steps to collect the money from the mega borrowers; to file the final report in the pending cases within a period of six months; to arrest the accused living abroad and also to attach hotels in Australia and in other places based upon the investigating report.

The Judge also asked them to impound the passport of all the accused concerned and all the passports should be seized, if not already seized, and without the permission of the Court, none of the accused should leave the country. He said steps should be taken to transfer all the cases to one and the same court for early disposal. The Chief Judge, Court of Small Cases, was also directed to dispose of all the attachment applications within a period of three months.

He also ordered the investigating authorities to file the status report before the Court once in three months.

RBF Nidhi was asked to file a report as to the amount collected from the borrowers and also the steps taken to sell the properties, once in three months, and they should get the approval of the Court before selling any one of the properties for a reasonable price.

As regards the allegation of some of the petitioners regarding siphoning off funds from the RBF Nidhi to the Chennai-based Balaji Distilleries and Balaji Industrial Corporation, through some employees of these companies, the Judge said the balance sheets of the companies for the relevant period along with the statement of schedule of creditors would demonstrate that there was nexus between these companies and the funds of RBF Nidhi, and under the circumstance, the applications filed on behalf of the petitioners were liable to be dismissed.

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