WILFUL DEFAULTERS – MAKE IT A CRIMINAL OFFENCE

By Ruma Dubey

There are defaulters and now there seems to be an increasing clan of wilful defaulters.

People who have the money but yet do not bother to repay the banks – that kind of debtors is on the rise. Sounds like Mallya? Well, he was one but there are apparently many more taking inspiration from him.

Yesterday in the Lok Sabha, responding to a set of questions, Finance Minister Sitharaman, she said that the number of wilful defaulters has risen 60% the five years up to FY19. The total number of wilful defaulters stood at 8,582 at the end of FY19 v/s 5,349 at the end of FY15.

The only silver lining here – over Rs.7600 crore was recovered from these defaulters.

The FM further added that as at 31st March 019, PSU banks had filed suits for recovery in 8,121 cases.

Action has been initiated in 6,251 cases under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – these are cases involving secured assets.

And based on regulations of RBI, FIRs have been registered in 2,915 cases.

Data on TransUnion CIBIL Limited, India’s first Credit information company reveals that as at 31st March 2019, there were 9856 wilful defaulters  of Rs.25 lakh and above across India. Their default/outstanding is to the tune of over some Rs. 15,930,632 lakh. The maximum number of willful defaulters hail from Maharashtra at 1931, followed by 1221 in West Bengal , 868 in Delhi, 692 in Tamil Nadu, 610 in Gujarat. NE states and Andaman & Nicobar had one defaulter each.

Out of this 9856 wilful defaulters, over 6473 were from the PSU banks and the maximum of these, over 960 accounts were from Punjab National Bank, followed by Union Bank of India and Central Bank of India.

In the private sector bank, there were a total of 1518 wilful defaulters and Axis Bank reported the maximum number of wilful defaulter accounts at 695, which is over 54% of the total private sector defaulters. The least were in J&K Bank. and DCB Bank.

So who is a wilful defaulter? In layman terms, what this means, to you and me is someone who has willingly not repaid the bank loans though he/she could have. This is right though RBI has put forth a very ‘legal’ definition stating that a willful default broadly covered the following:

a) Deliberate non-payment of the dues despite adequate cash flow and good networth;

b) Siphoning off of funds to the detriment of the defaulting unit;

c) Assets financed either not been purchased or been sold and proceeds have misutilised;

d) Misrepresentation / falsification of records;

e) Disposal / removal of securities without bank's knowledge;

f) Fraudulent transactions by the borrower.

The sticking of this tag to a person or company is like a red herring. It means the tap of all further loans, be it from any bank or even registered NBFCs, is tightly screwed shut. And it’s not just for the immediate short term; five years after this declaration, no new venture of the promoter or the company can be funded by any bank or financial institution.

RBI issued further clarification that companies in a group will be reckoned as wilful defaulters if guarantees furnished by them on behalf of the willfully defaulting units are not honoured when invoked by the banks/financial institutions. In simple language, this means that the guarantor, if he also does not clear the dues despite having the cash, then he too will be declared as a willful defaulter. 

RBI has also stipulated that a borrower can be declared a wilful defaulter if it was found that borrowed funds were used for purposes other than for which the loan was availed for. In that case, more than 50% of India Inc could be termed as willful defaulter!

Additionally, SEBI has debarred wilful defaulters and companies with wilful defaulters, from accessing capital markets to raise funds.

This is what infuriates the most. If a common man misses one or two EMIs, that too it could be a measly sum of less than Rs.1 lakh, he faces the threat of becoming homeless. Here, we have one man looting the country of over $1 billion and he jets around scot free, enjoying the high life. What kind of a country are we living in? Isn’t this capitalism? So we should all stop kidding ourselves that India has a socialist bent. If a country makes its policies, Budgets, bends rules to accommodate the rich and famous, how can we call ourselves as an ‘inclusive’ country. Let’s face it – we are a country which just borders on socialism; overall, all our attitude reeks of capitalism.

For more details on Suit-filed accounts (Wilful Defaulters) of Rs. 25 Lacs and Above as at 31^st March 2019, go to the following link and click on each individual bank name mentioned and then the branch http://suit.cibil.com/WSBankWise.asp?SelDate=06/30/2014&state=Maharashtra