By Ruma Dubey

Willful defaulter. That’s the only colorful adjective which United Bank of India could legally stick onto Vijay Mallya. Surely they would have liked to use better and much suited adjectives but for now, at least officially, he remains a willful defaulter. He owes banks some $1 billion and that’s the only tag he earned.

This is probably the first time that we have heard this term, willful 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.

Clearly, Vijay Mallya fits this bill to a ‘T’. And mind you, this does not happen overnight. It’s not like one fine day United Bank of India woke up and decided to call Mallya willful defaulter. The Bank had to go through the process of first notifying the company, giving it time to respond, explain why dues were not paid and only then, if no response comes or Bank is dissatisfied with the answer, this tag is publicly declared.

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.

And there has been a latest clarification on the same from RBI yesterday. It has stated that companies in a group will be reckoned as willful 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.  Apparently, United Bank already knew this rule as along with Mallya, it had already sent a willful defaulter notice to United Breweries which is a guarantor to the loans taken by KFA.

RBI has also clarified that a borrower can be declared a willful 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!

United Bank, relatively a small bank was more proactive while the largest bank of India, SBI has only now sent a notice to KFA as willful defaulter. The other banks are still contemplating action.

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 attitudes reeks of capitalism. Nothing wrong in that; except that we then should stop calling ourselves socialists.

Willful default should be declared a criminal offence. People like Mallya are truly the wrath of this society and its pitiable that banks have to pay a price to clean this dirt and indirectly me and you. Hope other banks speed up and all declare him willful defaulter. Let’s make it big!

For more details on Suit-filed accounts (Willful Defaulters) of Rs. 25 Lacs and Above as on 30-Jun-2014, 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