Nagarjuna Chief K S Raju Arrested, sent to Judicial custody
Business Standard / Daijiworld Media Network
Hyderabad, Dec 17: The XII Additional Chief Metropolitan Magistrate Court at Nampally here today sent Nagarjuna Group chairman and promoter of Nagarjuna Finance (NFL) K S Raju and another director P K Mahadevan to the Chenchalguda central prison on judicial remand till December 29.
The police arrested them on Monday for allegedly defaulting on payments to NFL depositors. The court today rejected a petition from them seeking medical assistance. "The court saw no merit in the petition filed (under Section 54) to send them to a medical examiner," a court statement said.
Though Mahadevan was produced before the court around 2.30 pm, Raju was taken in late evening. It is learnt that the police had taken him to his corporate office for recovering some documents relating to the case.
Plunged into an acute liquidity problem in 1999, NFL, a non-banking financial institution, had defaulted on repayment of matured deposits. The depositors approached civil courts, police stations and consumer fora and filed cases against NFL directors. Nearly 700 warrants issued by courts across the country are pending against them.
The diversified Rs 12,500-crore Nagarjuna Group, a household name in Andhra Pradesh, had set up NFL in 1982 with the objective of entering into the financial services industry though the group's core activity is in agrochemicals, irrigation systems and energy. It collected deposits worth hundreds of crores till 1997-98 from 52 branches country-wide.
The police said the company had collected deposits of Rs 98.3 crore from 85,160 people in 1997-98 in Andhra Pradesh alone. Of this, Rs 23.02 crore belonging to 16,122 depositors matured on December 31, 1999. The company, however, defaulted on payment of the matured deposits.
The defaults began when the company's borrowers failed to repay the loans taken. According to reports, the company had to receive Rs 130 crore from its borrowers.
In all, it had about 58 borrowers, who had to pay Rs 1-5 crore each. In fact, since 1999-2000, the company had discontinued its financial services activities and focused on recoveries.
With the pressure mounting for repayment of deposits, NFL filed a petition before the Company Law Board (CLB) seeking time for repayment of deposited amount for 12 -18 months. The CLB passed an order on February 29, 2002, allowing the company to repay the deposits over four years at an interest rate of 12. 5 per cent annually. But, the company failed to execute even the deferred payment schedule.
In September 2002, the Nagarjuna Group had entered into an MoU with Mumbai-based Mahalakshmi Factoring Services (MFSL) for divestment of its equity stake in NFL. Thereafter, Raju disowned the responsibility of repaying depositors stating that the onus now lies with MFSL, which has to pay dues by way of realising receivables.
MFSL filed an affidavit before the CLB seeking discharge of the board's earlier order in the matter of implementing the obligation towards the deposit holders. The CLB did not accept the plea and maintained that the arrangement made between NFL and MFSL shall not be of any consequence in relation to repayment of deposits.
The Registrar of Companies here also filed a petition before the Economic Offences Court against Raju and other promoters of NFL for their failure to repay depositors. The RoC submitted that the MoU between the NFL promoters and MFSL does not grant the promoters any indemnity from criminal proceedings.
On the other hand, NFL approached the Andhra Pradesh High Court pleading that in the light of the statutory order of the CLB orders the police be directed not to receive complaints from the depositors or register the case or pressurise the company to repay the deposits. The HC issued a stay order on the arrest of the accused in all cases.
Balakrishna Shetty of Janajagruthi Samithi Speaks to Daijiworld.com:
On the other hand, Jana Jagruthi Samithi Executive president Balakrishna Shetty, in a press release to daijiworld.com, informed that " There is a very strong link between the Nagarjuna Power Project in Yellur of Udupi district and this financial scam. The deposits were received in and around 1992-93 and that was the time he took over JESCO of 0.5 million tons per annum capacity steel plant and 360 MW power plant and got it expanded to an ultimate capacity of 2 million tons of steel and 1000 mw in power plant. Steel market collapsed and plant project was dropped and the power plant was given Independent Power Project category and was quietly shifted to Nandikur and then from Nadikur to Yellur though 1381 acres were already taken possession earlier in Thokur, Kenjur and Bykampadi villages of Mangalroe Taluk."
He also said that "The deposits received from the public were maturing for repayment in 1999 but the money apparently was used for payment to Karnataka politicians to withdraw the Government Order for conducting carrying capacity study. He also managed to get Government Orders issued granting Escrow cover, Govt purchase guarantee and custom duty exemption for imports, sales tax, import duty and stamp duty exemption for land transfers and various other financial sops. Mind you these facilities were granted despite the fact that the project was not through competitive bidding. To buy even the stationary for Government office we need to call for tenders under Karataka Procurement Transparency Act."
Shetty has alleged that, Many politicians in the State including in Udupi district are involved with Raju who used district and police officials as tools. He also bribed the Panchayat Secretary and obtained a spurious License although there was a resolution from the members, taluk panchayat and the Zilla panchayat not to permit the coal based power plant. He managed to get prohibitory orders u/s 144 declared to fence the entire Yellur area and cut and stole away the valuable trees including sandal woods with police protection. The Kumaraswamy government once said that it had filed several cases against his company for forest theft but with politicians hand in gloves with him nothing really mattered.
According to Shetty "A number of villagers from Yellur and Nandikur in particular had to go underground on charges of an attempt to murder of one of his officials though he was injured he was injured in the in-fighting among the staff in a financial dispute. The police had all the evidences. I was arrested from Vikas Saudha where I was to attend a meeting on the invitation of the Committee formed to study the viability of the project by the ten CM, Shri Kumaraswamy. The Committee died hereafter without discussing any issue."
It can be recalled that, Janajagruthi Samithi headed by Dubai based Balakrishna Shetty has been opposing coal based power project in Nandikoor, Padubidri for environment reasons.
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Nagarjuna Will Never Come up : Balakrishna Shetty