Probe Margadarsi Financiers' dealings, Vundavalli tells FM

New Delhi, Nov 6 (UNI) Congress MP from Andhra Pradesh Aruna Kumar Vundavalli today said he has urged Finance Minister P Chidambaram to conduct a thorough investigation into the affairs of Hyderabad-based Margadarsi Financiers as it has run into a staggering loss of Rs 1,100 crore, hitting hard the middle income public which has deposited over Rs 2,200 crore.

Mr Vundavalli said his 86-year-old mother and brother were among those who had put their money in the company, which refused to accept less than one lakh rupees as deposit despite the losses.

''Apparently, the depositors are not aware of the financial status of Margadarsi Financiers,'' which continued to take desposits mainly to pay interests on the earlier deposits, he said.

Even the Income Tax Department, where the financial statements were filed along with the assessment returns, had also kept quiet without inquiring into whether annual accretions to the deposits were from members of the general public or the amounts recycled clandestinely against the provisions of Money Laundering Act, the Lok Sabha member told reporters.

When his mother and brother wanted to collect their deposits on maturity the company merely accepted the bonds and issued a receipt in return and asked them to get back after a week, he said.

Upon this, Mr Vundavalli said he went into the affairs of the company and found that it was accepting deposits from the public though, as a Hindu Undivided Family (HUF), it had no legal sanction to do so.

''A HUF has to comply with the provisions of Sec 45-S of RBI Act, 1934 which clearly mandates that they cannot raise deposits from the public.'' Despite this, the Margadarsi Financiers had raised Rs 2,201 crore as on March 31, 2005, as deposits from the public and reported an accumulated loss of Rs 1,100 crore as on that day.

In 2004-05, the Financiers mobilised Rs 300 crore as deposits and utilised Rs 245 crore of this for payment of interest, which meant only Rs 55 crore was used for further investments. This was done as the organisation had suffered a loss of Rs 231 crore in 2003-04, he said.

While Margadarsi Financiers was incurring an annual loss of over Rs 200 crore, the total profits of all the group companies in which the investments had been made was not more than Rs 100 crore a year, the MP said.

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