The Supreme Court on Monday issued notices to the governments of Telangana and Andhra Pradesh, Reserve Bank of India (RBI), and Margadarsi Financiers in a case concerning alleged unauthorised collection of public deposits, making it clear that the death of media baron Ramoji Rao does not bring an end to proceedings against the entity.
A bench comprising justice MM Sundresh and justice NK Singh observed that the continuation of a financial establishment keeps legal accountability alive, regardless of the demise of its promoter. The Court indicated that it may examine the possibility of attaching the assets of the entity as part of the proceedings.
The matter arises from a special leave petition (SLP) challenging a Telangana High Court ruling delivered in August 2025 which had quashed criminal proceedings against Margadarsi Financiers in connection with an alleged economic offence involving public deposits.
During the hearing, senior counsel Mukul Rohatgi, appearing for the respondents, submitted that the case should be closed in view of Mr Rao’s death. He also informed the Court that an affidavit would be filed to show that depositors’ dues had been cleared.
However, the apex court signalled that the dispute goes beyond individual liability and involves alleged statutory violations by the entity itself, particularly in relation to the handling of public funds. The Court emphasised that the legal scrutiny must continue where allegations pertain to institutional conduct and compliance with financial regulations.
The petition before the Supreme Court contends that the High Court erred in terminating proceedings at a preliminary stage, even as investigations into the alleged irregularities were still ongoing. It argues that this prematurely halted a deeper probe into what is described as a large-scale financial issue involving public money.
According to the plea, Margadarsi Financiers, described as an unincorporated entity, is accused of mobilising deposits from the public in violation of Section 45S of the RBI Act, which restricts such activities by unregulated entities. The petitioner claims that concerns regarding these practices have existed for years, with collections allegedly running into thousands of crores.
The challenge also points to provisions under Section 58B(5A) of the RBI Act, which prescribe stringent penalties, including fines linked to the quantum of deposits collected in contravention of the law. It is argued that these statutory provisions were not adequately considered while quashing the complaint.
Further, the petitioner has relied on judicial precedent to argue that a complaint or first information report (FIR) need not contain exhaustive details at the initial stage and that investigations should be allowed to proceed to uncover the full extent of alleged wrongdoing.
The case has its roots in earlier enforcement action in Andhra Pradesh, where the crime investigation department (CID) had initiated multiple cases against entities linked to Margadarsi. Authorities had alleged diversion of funds, violations of chit fund regulations and misuse of public deposits. In 2023, the state government had also ordered attachment of assets worth hundreds of crores under the Andhra Pradesh Protection of Depositors of Financial Establishments Act.
With the Supreme Court now stepping in, the focus shifts back to whether criminal proceedings should be revived and whether the alleged financial irregularities warrant further investigation. The Court’s observations indicate that the issue will be examined not merely from the standpoint of individual culpability, but in terms of regulatory compliance and protection of public funds.
The matter is expected to come up for further hearing after responses are filed by the concerned parties.
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