Hyderabad/Mumbai: Comments by Hyderabad Police that it is now targeting Nimesh Kampani, chairman of JM Financial, in its efforts to recover alleged defaults to depositors of Nagarjuna Finance Ltd, has caught the Mumbai-based doyen of Indian high finance by surprise.

In the spotlight? Chairman of Mumbai’s JM Financial Nimesh Kampani. Ashesh Shah / Mint

He noted that he had resigned as Nagarjuna Finance director in 1999.

“We are in 2008," he added. “I don’t know why they are linking me to the company now."

Kampani said he had resigned as a director from five-six companies because “those days, the number of companies an independent director can be on board was restricted to 15 from 20."

Kampani was, however, on the board of Nagarjuna Finance, when the NBFC (non- banking financial company) raised deposits from the public. Kampani is believed to have stepped down on 28 April 1999.

On Sunday night, R.S. Praveen Kumar, deputy commissioner of police, told Mint that, “We are proceeding against Nimesh Kampani, who is the third accused in the FIR (first information report). However, I cannot reveal the exact moves of police in proceeding against Kampani keeping in view the interest of protecting the interests of nearly 100,000 depositors involving some Rs100 crore."

Citing an unnamed “senior police officer", the DNA newspaper had reported on Monday that the police “have information on Kampani’s role in causing the alleged loss to the depositors of Nagarjuna Finance". The newspaper said Kampani couldn’t be reached for comment.

The police’s move against Kampani comes on the heels of the Hyderabad Police taking into custody the chairman of Nagarjuna group, K.S. Raju, and chief executive officer of Maytas Infra Ltd, P.K. Madhav.

Raju was a promoter of Nagarjuna Finance before he divested his holding in favour of a Mumbai-based company, Mahalakshmi Factoring Services Ltd in September 2000. Madhav, like Kampani, was on the board of Nagarjuna Finance when it raised public deposits.

On 16 December, police in Hyderabad took Raju and Madhav into custody and then produced them before a city court, which ordered 14 days of judicial remand. Both were arrested under section 5 of the Andhra Pradesh Protection of Depositors of Financial Establishments Act and also under sections 420 and 406 of the Indian Penal Code.

Raju has been fighting cases filed by the ministry of company affairs through the Registrar of Companies (RoC), which had moved the economic offences court against Raju and other directors responsible for raising public deposits.

Raju claims that his group had divested its equity holding in the finance company to Mahalakshmi and the onus for replaying any deposits lies with them.

However, RoC insists that since the management change at Nagarjuna Finance was apparently done without the consent of shareholders or depositors, the change of management, through a memorandum of understanding (MoU), cannot absolve the statutory responsibility imposed on the promoters of Nagarjuna group.

RoC had also submitted before the court that the MoU between the group promoters and Mahalakshmi doesn’t grant the promoters any indemnity from criminal proceedings.

Raju has been admitted to a local hospital in Hyderabad while Madhav remains imprisoned at the Chanchalguda prison in the city.

Madhav was associated with the Nagarjuna group for nearly two decades as director finance on the board of Nagarjuna Fertilizers and Chemicals Ltd during 1982-2001.

His arrest comes amid another corporate saga involving Maytas, which was the focus of an aborted acquisition by Satyam Computer Services Ltd, the computer services company that quickly backed off the deal when investors punished its shares.

The promoters of Maytas are sons of the chairman and promoter of Satyam, B. Ramalinga Raju. Earlier this year, Kampani had picked up an undisclosed equity holding in Maytas for Rs600 crore.