Prosecutors yesterday accused the 35-year-old president of a large Fairfax City disco of burning down his financially failing business in order to collect on its large insurance policy.

Manoutcher Rahnama, a Tehran native who moved to Virginia in 1963, faces a 2- to 10-year jail term if convicted of the March 20, 1979, arson that destroyed the Bachelors II disco.

Prosecutor Raymond Brownelle argued to a Fairfax Circuit Court jury yesterday that it was "economically advantageous" for Rahnama to start the blaze that gutted the establishment near the intersection of Lee Highway and Main Street.

Brownelle contended in opening statements that a change in Fairfax City zoning laws restricting the hours that dancing was allowed, and the impending revocation of the disco's liquor license were motives for the crime. The trial is expected to last seven days and involved more than 40 witnesses.

"It had been very successful . . . but after these events, business was poor," Brownelle said. "(Rahnama) attempted to sell the business a month before the blaze, and had been notified about the decision to revoke the mixed-drink permit three days before the fire."

Rahnama has pleaded innocent to the charge.

Prosecutors said their witneses will testify that two men were seen running from the brick-and-cinder-block building shortly after the the fire started, but defense attorneys Steven Armstrong and G. James Frick argued that their witness will state that neither man resembled Rahnama. Rahnama "had enough money to handle his problems," according to the defense attorneys.

A former bookkeeper at the disco, Patricia Badillo, testified yesterday that a "strange . . . frightening man" had been ordered off the Bachelors II premises a day before the fire. The man "with piercing blue eyes" had been carrying a large brown bag at the time, Badillo testified.

The former bookkeeper also testified that she had been ordered to systematically falsify liquor sales so that disco's mixed-drink permit would not be revoked by Virginia authorities.

"They were trying to get food sales to balance with the liquor sales, and it involved transposing liquor sales into food sales receipts, in order to keep the license," Badillo said.

O. D. Weber, owner of the property, testified that Rahnama's business was five months behind in rent payments at the time of the fire.