Case Report: ED Investigation on Mr. VP Nandakumar, promoter, Manappuram Finance
Limited
On the 3rd and 4th of May, 2023, the Enforcement Directorate (ED) conducted searches at
multiple locations on premises linked to Manappuram Finance Limited (MFL) group in
Thrissur, Kerala. They also carried out searches at MFL's promoter, Mr. VP Nandakumar's office
and residence.
The searches were based on allegations of illegally collecting deposits worth Rs. 150 crores
from the public without RBI's approval. MFL was also suspected of doing large-scale cash
transactions by violating KYC norms. At the end of the operation, Mr. VP Nandakumar also
received an order freezing his personal assets under section 17 (1-A) of the Prevention of
Money Laundering Act (PMLA), 2002. These included 19,29,01,996 equity shares (78.6% of
total promoter shareholding of 29%) he held in MFL.
MFL later clarified that the incident was with reference to a case in 2012 concerning deposits
worth ₹150 crores accepted from the public by the now defunct Manappuram Agro Farms
Limited (MAGRO), of which Mr. Nandakumar was the sole proprietor. MAGRO was started as
agriculture was the primary occupation for people of Valapad, Thrissur, and used to accept
deposits. Being a proprietary concern and not regulated, MAGRO complied with the KYC
norms back then, made acceptances and repayments only by crossed cheque, and recorded
details such as full name, address, phone number, amount, etc., of all payments duly. As on
February 2012, MAGRO's outstanding deposits were Rs. 143.85 Crores; however, based on a
directive from RBI, they stopped taking further deposits and informed the public through mass
media and leading newspapers in English and Malayalam that they would be returning the
collected money with interest due. Mr. VP Nandakumar sold his shares in the Company to
raise an amount of 159 Crores to repay the depositors.
Following this, Rs.34.56 Cr was repaid by cheque between February 1, 2012, and March 16,
2012, to people who came forward to claim their money. The unclaimed balance of deposits
on March 17, 2012, along with accumulated interest, was Rs.119.18 Cr, which was deposited
in an escrow account with Punjab National Bank. All subsequent repayments to the depositors
were made from this escrow account, and MAGRO periodically informed RBI about the
progress. In its latest inspection report, RBI had acknowledged that as of September 2022,
only Rs 9.29 lakhs was left in the escrow account, the balance outstanding because certain
depositors had failed to claim their respective deposits, despite MAGRO's repeated efforts of
sending letters and issuing transfers in the depositors' favor, which returned unclaimed. The
RBI also issued a letter stating they're largely satisfied with MAGRO's actions. RBI, SEBI, and
Registrar of Companies have investigated the issue separately, and nothing was found amiss.
The recent ED visit was in connection with a complaint filed by one Mr. PK Sagar before the
First Class Judicial Magistrate Kodungallur (CMP No. 4374/2022). It should be noted that Mr.
Sagar had filed a complaint about the same issue of deposits 13 years ago, which were
returned promptly, and the matter was amicably closed then. MFL, post its board meeting
held on May 05, 2023, has stated in an update issued to BSE that the matter is not related to
the affairs of the Company and is only against its promoter Mr. VP Nandakumar. MFL further
stated that the outcome of the matter is not expected to have any impact on the Company as
the concerned regulator has settled the allegations made in the case in 2011-2012 and that
the details of the same are available in the public domain.
As for the new complaint (CMP No. 4374/2022), the court forwarded the matter to Valapad
Police Station (Thrissur, Kerala), and FIR No. 376/2022 was registered. Mr. VP Nandakumar
challenged the above complaints by filing Criminal miscellaneous case No.4436/2022 to quash
all further proceedings to the aforementioned FIR. After hearing of both parties on case
No.4436/2022 on 15th of June, 2023, the High Court of Kerala has deemed the case as purely
personal in nature, having no adverse effects on public interest or harmony, and has quashed
FIR No.376/2022 on the same day, thereby ending all further investigation into the issue and
clearing the promoter's name. An affidavit sworn in by the respondent (Mr. PK Sagar) clearly
stating that the dispute has been settled and he does not want to proceed with the case
further was also produced.
The detailed chronology of events is as below:
S. No
1
Date
17-06-2021
2
11-05-2022
3
24-05-2022
4
05-07-2022
5
6
25-11-2022
01-12-2022
7
06-01-2023
8
04-02-2023
9
14-02-2023
10
11
03-05-2023
04-05-2023
Event particulars
A petition was filed by Mr. PK Sagar, seeking to initiate enquiry under
the prevention of Money Laundering Act, 2022, by the ED.
A compliant (CMP No. 4374/2022) was registered before judicial
First Class Magistrate’s court (JFCM), Kodungallur, Kerala.
The court forwarded the matter to Valapad Police Station, in
Thrissur, Kerala, and an FIR was registered (N0.376/2022)
The complaint and FIR were challenged by Mr. VP Nandakumar
before High Court of Kerala by filing Criminal Misc. case (No.
4436/2022). The court decided that no coercive action shall be
taken against the petitioner on the basis of complaint and FIR.
ED initiated investigation on the basis of FIR
ED initiated summons to Mr. VP Nandakumar and his family
members to appear for investigation. In response, everyone except
his son, who is residing abroad, appeared before ED and provided
all documents and offered full cooperation
The RBI inspection conducted in Manappuram finance Limited,
during the period 10-10-2022 to 04-11-2022 recorded the fact that
the unpaid deposit at the time of inspection was only Rs. 9.56 lakhs
as on 30-09-2022, which was held in an escrow account.
The investigation officer filed report stating the complaint filed is a
‘false’ one, and no offence was alleged by complainant. On the basis
of said report, the JFCM closed the proceedings.
The High Court disposed of the petition, reserving the rights of the
parties to pursue their remedies in accordance with law.
ED made search of the promoter premises, details as above
Mr. VP Nandakumar is served with an order under the PML Act,
freezing the accounts maintained with various banks and the shares
held in certain listed entities, including MFL.
12
15-06-2023
Final hearing of both parties on case No.4436/2022 takes place, the
High Court of Kerala quashes the FIR No.376/2022 of Valapad police
station, Thrissur.