Wednesday, September 10, 2014

பதவி நீக்கம் செய்ய கோரிய மனு; சுப்ரீம் கோர்ட் சி.பி.ஐ. இயக்குனர் ரஞ்சித் சின்காவுக்கு நோட்டீசு





புதுடெல்லி புதன்கிழமை , செப்டம்பர் 10, 2014

சி.பி.ஐ. இயக்குனர் ரஞ்சித் சின்கா, 2 ஜி ஸ்பெக்டரம் ஊழல் மற்றும் நிலக்கரி சுரங்க ஒதுக்கீடு முறைகேடு ஆகிய வழக்குகளில் தொடர்புடைய சிலரை தனது அதிகாரப்பூர்வ அரசு இல்லத்தில் சந்தித்து பேசியதாக குற்றச்சாட்டு எழுந்தது.

ஊழல் வழக்குகளில் சம்பந்தப்பட்டவர்களை பொதுவாக சி.பி.ஐ. இயக்குனர் தனது அலுவலகத்தில் அதே வழக்கை விசாரித்து வரும் மற்ற அதிகாரிகளின் முன்னிலையில் சந்தித்து பேசவேண்டும் என்பது சட்ட விதியாகும்.

இந்த விதிமுறையை மீறி ஊழல் குற்றச்சாட்டில் தொடர்புடையவர்களை அவர் சந்தித்து பேசியதாக மூத்த வக்கீலும், நிலக்கரி சுரங்க ஒதுக்கீடு முறைகேடு பொது நல வழக்கில் ஆஜராகி வருபவருமான பிரசாந்த்பூஷண் குற்றம் சாட்டினார். ரஞ்சித் சின்காவின் வீட்டின் உள்ள பதிவேடுகளின் மூலம் இந்த உண்மை தெரிய வந்ததாகவும் அவர் குறிப்பிட்டார்.

இதேபோல் ஹவாலா மோசடி வழக்கில் தொடர்புடைய இறைச்சி ஏற்றுமதியாளர் மொயின் குரேஷியையும் அவர் தனது வீட்டில் சந்தித்து பேசியதாக புகார் கூறப்பட்டது.

இது தொடர்பாக சுப்ரீம் கோர்ட்டில் பிரசாந்த்பூஷண் பிரமாண பத்திரம் ஒன்றையும் தாக்கல் செய்தார். மேலும், ரஞ்சித் சின்காவை பதவி நீக்கம் செய்யவேண்டும் என்று அவர் பிரதமர் நரேந்திர மோடிக்கு கடிதமும் எழுதினார்.

பிரசாந்த் பூஷன் தொடர்ந்த வழக்கில் சுப்ரீம் கோர்ட் சி.பி.ஐ இயக்குனர் ரஞ்சித் சின்காவுக்கு நோட்டீசு அனுப்ப உத்தரவிட்டது.  10 நாட்களில் பதில் மனு தாக்கல் செய்ய சின்காவுக்கு சுப்ரீம் கோர்ட் உத்தரவிட்டு உள்ளது. மேலும் வழக்கை 19-ந்தேதிக்கு ஒத்திவைத்தது. 

SC issues fresh notice to CBI director in coal scam

CBI Director Ranjit Sinha
PTI    New Delhi   September 9, 2014 
A day after the Supreme Court issued notice to CBI director Ranjit Sinha for allegedly protecting some accused in 2G case, another bench of the apex court on Tuesday sought explanation from the top cop on similar allegations in the coal scam.
A bench headed by Chief Justice RM Lodha issued a notice to the CBI director on a plea seeking an SIT probe against him for allegedly protecting the accused in Coalgate and to keep him away from the investigation and prosecution in the multi-crore scam.
Granting 10 days time to the CBI chief to file his response to the allegations, the bench refused to pass any order for recusal of Sinha in the case.
The court posted the case for further hearing on September 19.
At the begining of the proceeding, the bench observed that an order had already been passed by another bench of the apex court against Sinha and no further order was required.
But advocate Prashant Bhushan, appearing for an NGO, which filed the application against Sinha, contended that Monday's order was on the 2G case and the court could pass another one pertaining to the coal scam.
Thereafter, the bench agreed to issue a notice to Sinha and posted the case for to the day following the hearing on the 2G scam, which is to take place on September 15.
In the application filed in the court, NGO Common Cause had referred to reports about the entry register at Sinha's residence containing names of "influential" persons allegedly involved in the coal scam.
It accused him of scuttling the probe in the "high magnitude" coal scam case in which 20 FIRs for offences of corruption, cheating and criminal conspiracy have been lodged and two charge sheets filed in the trial court.
On Monday, another bench of the apex court - headed by Justice HL Dattu - which is monitoring the 2G scam case, had directed Sinha to come out in "black and white" on averments made against him for allegedly entertaining scam-tainted visitors at his official residence here, saying that it is a "serious" issue.
The application filed by the NGO had referred to the alleged instances that "enumerate the instances of undue interference on the part the CBI director" in the coal scam probe.
The NGO had said that a trusted whistle-blower has brought to the notice of Bhushan some significant information contained in the entry registers of the years 2013 and 2014, which were maintained at the official residence of the CBI director at 2, Janpath, New Delhi.
"Hence, in the light of these facts and circumstances, it is respectfully prayed that in public interest and in the interest of fair investigations in the case, this court may be pleased to direct that Sinha shall not interfere in coal block allocation case investigations and the prosecutions being carried out by the CBI, and shall withdraw from these cases," the application had said.

Lanco Infra to sell 3000 mw power assets to retire part of debt

BL 9 Sep 14
Lanco Infratech Limited has decided to sell up to 3000 mw of power generation assets to raise up to Rs.15000 crore in cash and thereby retire part of the company debt of over Rs. 36,000 crore.
The company had recently divested the 1320 mw Udipi thermal power plant to Adani Group entity for Rs.6,000 crore and Budhil hydel project earlier for Rs. 650 crore to Greenko and about 10 mw of wind generation assets, all with a view to bringing down its piled up debt.
Faced with the challenge of mounting debt and the huge financial commitments to serve the growing debt and poor cash flows due to delays in project implementation impacted by macro economic issues, the diversified infrastructure company has decided to sell several of its assets.
According to the company senior official, since last one year, the company has been working on each of the projects to settle the issues and bring back viability. This includes a major Corporate Debt Restructure process where a clutch of over 25 lenders have agreed to restructure the loans and have laid down certain conditions, including sale of assets to free up equity and pay the debt.
Some of the bankers are keen at early sale of assets so that the debt burden could be brought down, freeing up equity for ongoing projects.
The company has a portfolio of 4732 mw under operation, 4636 mw under construction and around 9000 mw at various stages of development.
Lanco Infra could not mobilise additional funds due to the tough economic scenario and capital markets. Even the overseas investors are treading cautiously on investments in the power sector due to inherent problems faced by the power sector, including fuel supplies and delayed payments by Discoms.  

United Spirits may provide ₹2,000 cr more for loans

BL 10 sep 2014
United Spirits is likely to make more provisions or writedowns for loans as the UK-based parent Diageo goes about cleaning up the balance sheet of the company.
Last week, United Spirits said that it has already made a total provision of ₹4,321 crore, including writedowns for Whyte & Mackay deal.
A UB Group spokesperson did not respond to queries regarding fresh provision for loans.
Arun Kejriwal, an analyst with a brokerage firm KRIS, said the additional provisions could be about ₹2,000 crore though it remains to be seen how much more the probe panel unearths cases involving unsecured loans.
An analyst with another brokerage firm said that while it was clear that more provisions could be made, it was not possible at this stage to put a number to it. “Usually, big MNCs like Diageo are very, very fast in cleaning up the accounts and in another couple of more quarters, one can actually see the results,” said the analyst, who cannot be named because his company does not allow him to talk to the media.
Probe panel
The board has already constituted a probe panel, which will be headed by United Spirits Ltd (USL)’s Managing Director Anand Kripalu, which will go into all transactions carried out by the company, role of individuals involved and potential non-compliance of regulations.
The board has allowed the panel chief to even hire independent advisors and consultants for this purpose.
The auditors of the company BSR & Co also noted that pending such inquiry, it is unable to comment on the nature of these transactions, the provision established or any further impact the profit and loss statement.
But Kejriwal felt that the bigger issue was whether Diageo carried out enough due diligence of the accounts of United Spirits before acquiring it.
“It is not about higher provisions but about the decisions made before buying stake in United Spirits,” he said.
Nomura has already said that there are several loose ends to the accounts of United Spirits and Diageo should not get sidetracked on sorting out the business.
Up borrowing limit
Meanwhile, the company in a listing with the BSE said that it seeks to increase the borrowing limit to ₹10,000 crore.
The company’s stocks were up by nearly 1 per cent to ₹2288.70 at the end of the day’s closing.

Wilful default: apex court verdict, ‘a boost’ for banks

Deepak Narang, Executive Director of United Bank of India
Deepak Narang, Executive Director of United Bank of India

BL 8 Sep 2014
Bankers are likely to be more assertive against wilful defaults in the days to come, says Deepak Narang, executive director of United Bank of India.
Narang, who had slapped a “wilful defaulter” case on UB group chairman Vijay Mallya and three other directors of Kingfisher on September 1, feels the court verdict has so far vindicated the powers granted to banks by the RBI to recover bad-debts.
“It’s a landmark judgement”, he told BusinessLine on Monday.
The case in point is UBI’s stand that only company officials, representing the board members, should take part in grievance redressal (over NPA) procedures.
Mallya opposed this stand and wanted his lawyers to handle the matter.
He was successful in thwarting a similar attempt by Punjab National Bank, which also lent money to the grounded airline. A Delhi High Court had ruled in favour of Mallya.
Empowered to act
But this time, a single-judge bench and then a Division Bench of Calcutta High Court ruled in favour of UBI. And, now the Supreme Court has rejected an appeal on the same grounds.
“We thought we were empowered to deny KFA’s appeal. Now our stand is vindicated,” Narang said.
He expects the judgement will be a shot in the arm for other banks trying to avoid legal hurdles in declaring entities “wilful defaulters” and summoning them for non-recovery of dues.
Taking a cue from UBI’s success, PNB has lodged a fresh appeal before a Division Bench of Delhi High Court.
Narang is all praise for the courts in disposing of the petitions from Mallya swiftly.
Praise for court
“For me the court has been a temple of justice,” he says elaborating that the single-judge bench took just six days to reach a conclusion and the division bench completed the hearing in about two weeks.
But didn’t he face political pressure? Narang says he did not. Moreover, the actions were not specifically against Mallya or Kingfisher.
The bank was in the news last fiscal for piling up bad debts. UBI is now working in ‘mission mode’ to bring down gross NPAs from 10.49 per cent to nine per cent of total advances by the end of this fiscal.
“We have served wilful defaulter notices against many others,” Narang says.
Drastic action against defaulters helps by sending the right message down the line, he says.
The move will get a further boost with the Centre planning to table a Bill against wilful defaults in the winter session of Parliament.

Jailed Subrata Roy is paying the price for arrogance of power

Firstbiz Jagannathan 9 Sep 2014
That are the lessons we can learn from the fall from grace of Vijay Mallya and Subrata Roy?
While the former is battling the banks after being declared a “wilful” defaulter by the United Bank of India, a declaration which could cost Mallya all his board positions, the latter completed six months in jail this week for what we should call “wilful” defiance of a Supreme Court verdict. The verdict, delivered as far back as 31 August, 2012, asked Roy to return all the money raised through two illegal issues of optionally fully convertible debentures (OFCDs) to Sebi – for onward dispatch to genuine investors. Roy went to jail only on 4 March this year after stringing the Supreme Court along for 18 months.
Some 10-15 years ago, it would have been a fair bet that neither Mallya nor Roy would have been hauled over the coals for “wilful” transgressions of their loan conditions or the law. A political system of cronyism that ensured that the big fish always got away would have come to their rescue.
Now, no one can be sure. The reason is simple: all democratic institutions have been damaged and compromised so much by rampant cronyism – the executive, the legislature, the investigative agencies, the regulators, the judiciary, and the media – that they are now fighting hard to regain the credibility they have lost.
The courts, damaged by allegations of cronyism and corruption, are unwilling to be seen as handmaidens to the corrupt. They are over-reaching to prove they are clean.
The media, in an effort to redeem itself, is making extra efforts to chase every crook – real or imagined. Despite efforts by sections of the media to tone down coverage of wrongdoing when it involves their own commercial interests or owners, the media as a collective is sparing no effort to prove its worth.
The investigative agencies and the regulators see the nailing of big names as key to their own future credibility.
The banks, under fire for lending money to all kinds of unviable projects under pressure from politicians and through corrupt practices, are tightening up their act and going after defaulters.
The regulators, Sebi and RBI among them, long seen as kowtowing to the powerful, are also refusing to yield an inch where earlier they would have been open to compromise.
Big fish in net
Mallya and Roy are some of the first big fish to be caught in the net when all institutions are trying to re-establish their independence – both to themselves and the public at large.
So, if Mallya is trying to wriggle out of his “wilful defaulter” status by appealing to the higher courts on technicalities, he is likely to face severe resistance from the judiciary. The Calcutta high court, for example, refused to hear his plea to let a lawyer represent his company before United Bank of India (UBI) in the case; on Tuesday (2 September), the Supreme Court refused to humour him too, as this Hindustan Times report says.
In Subrata Roy’s case, where a bail could easily have been granted so as to enable him to negotiate the sale of his assets and pay Rs 10,000 crore, the Supreme Court steadfastly refused to play ball. Instead, all the court would allow was to let him use the conference room at Tihar jail to conduct negotiations to sell his hotels abroad. The court knows that the entire OFCD issue could not have been made to legitimate investors. Parts of it could have been benami. This was probably why it could not let him do his deals independently.
Arrogance vs contrition
Mallya and Roy are paying the price because they chose to show defiance at a time when all democratic institutions are trying to re-establish their damaged credibility by looking beyond the technicalities of the law and going after the powerful.
Both Mallya and Roy failed to understand that when it was time to show contrition, they showed arrogance.
India’s institutions are in internal reform mode, and powerful people are not going to get away lightly by pretending they can buy their way out with just the help of smart-talking lawyers.


There are lessons here not just for Mallya and Roy, but all of India’s powerful politicians and businessmen.
 

Wilful defaulters: RBI just ended the free lunch for crony capitalists

Wilful defaulters: RBI just ended the free lunch for crony capitalists
First Biz Jagannathan 10 Sep 2014

The Reserve Bank of India's (RBI's) decision to allow banks to tar entire business groups as "wilful" defaulters in case even one firm in the group defaults on loans is a game-changer for Indian capitalism. Apart from putting the fear of god in recalcitrant promoters, government, bankers and India Inc will be forced to rethink the way they chummed up in the past.
New laws, on bankruptcy and recovery of debts, will have to be enacted. Bankers will find that they can no longer hide behind their public sector façade to do deals on behalf of the powerful. Politicians who think they can swing loans to their pals will find it tougher to do so.
The central bank’s decision, seen in the context of the broader moves towards greater transparency in public action that results in significant - and often unwarranted - private benefits to the rich and powerful, will over the next few years lead to a cleaner, meaner and more robust capitalism where merit, not connections, will be rewarded by the markets.
RBI Governor Raghuram Rajan is thus about to end the free lunch offered to crony capitalists under the garb of socialist principles.
To be sure, the RBI’s move to extend the ambit of the term "wilful" default – possibly prompted by Vijay Mallya’s Kingfisher default – is draconian. The new norms say that guarantors of loans can also be declared wilful defaulters, and individuals on boards of companies declared defaulters will find their sins following them to other boards where there may be no defaults. These boards will thus have to send such directors packing to protect themselves. Group companies that offer guarantees that they do not honour will also be called defaulters.
However, as is always the case, draconian measures are necessitated whenever ordinary measures don't work and when other institutions - like bank boards, the executive, the legislature, and the courts - fail to do their jobs.
Under a proactive Governor, the RBI has had to step in to protect the banking system and depositors' money because there is no sensible bankruptcy law, because the courts give endless stays on debt recovery processes, because public sector bank boards are not asserting themselves enough and questioning loans to dubious parties, and because government is mucking around with bank autonomy and top level appointments.
The new wilful defaulter guidelines, which will apply only prospectively, are thus a useful antidote to the problem of crony promoters treating public money as their own. In essence, the RBI is striking at the root of crony capitalism.
The four pillars on which Indian capitalism has been built are the following:
#1: The business group. Unlike the west, where conglomerates are dying, India Inc has built itself around large business groups - Tatas, Birlas, Mafatlals, Ambanis, and so on. The concept of group provides banks with a false sense of security on the assumption - flawed, no doubt - that a large group is somehow more bankable than a single company.
The RBI has undercut this comfort factor by putting groups at the centre of the firing line on loan guarantees. In future, group companies will think thrice before guaranteeing the loans of fellow groupies, and independent directors will start acting "independent" for fear of attracting the defaulter tag which could dog them everywhere.
Indian conglomerate thinking will undergo a transformation as groups are forced to choose between genuinely profitable business plans and marginal or dubious ones. In the coming years we will see India Inc divesting businesses and sharpening focus to be on the right side of lenders.
#2: Very little skin in the game. India Inc has had a cavalier attitude towards loan repayment because it has very little of its own capital at stake in almost any business. Thanks to political connections and plain corruption, most Indian capitalists have built empires out of thin air with minimal equity contributions. They did this in several ways: one was by inflating capital costs so that their share of equity is actually funded through the excess loans given by banks for projects. This excess is then siphoned off (through contracts for plant and machinery) and comes back as their share of equity – or even used for personal purposes.
If a project succeeds, promoter wealth grows. They can then either take it out for personal use or float another company using primary capital from the successful company and then generating the balance by skimming money from overinvoicing imports or underinvoicing exports. Or other such ruses. If the project fails, they don't lose any of their own money. They are happy to let banks carry the can.
The RBI has now ensured that banks will not lend to multiple projects with little promoter contribution, and promoters themselves will find their ability to let a small amount of capital go a long way circumscribed.
#3: Private losses, public rescue. The fact that nationalised banks funded most of Indian private businesses in the past ensured that India Inc got away scot-free even when they failed to pay up and landed banks in a mess. In the sixties and seventies, entire industries in textiles and jute went sick and got taken over by public sector corporations which racked up losses paid for by taxpayers. Banks which funded the losses were also recapitalised by the government in order to keep up the good work. This system of endlessly bankrolling bad investments meant that the tab for bad (or malafide) business decisions was picked up by the taxpayer – and businessmen faced no social or economic consequences of business failure.
The RBI norms on defaulters will come to haunt promoters who left their old companies sick and think they can start new ones without guilt.
#4: Weak regulation. When the stock markets were opened up after 1991, thousands of promoters raised money from investors for industries that were the flavour of the season: plantation companies, leasing companies, etc. Many of these promoters just raised money and vanished – as the market regulator, Sebi, was too weak to keep track. Now the regulator is stronger, but determined promoters have found ways to cock a snook at the regulator. A case in point: Subrata Roy evaded Sebi for years, and even the Supreme Court humoured him for 18 months before sending him to prison in March 2014. Now he has to sell parts of his businesses to get out. Many Ponzi schemes – PACL and Saradha being only the latest – emerged in the interstices between two regulators and made hay.
The RBI norms will dent this kind of crookery too for the definition of defaulter has been extended to borrowers who use bank money for purposes they were not intended. Many fly-by-night operators used money siphoned off from regular enterprises to start dubious companies from where money can end up in promoters’ pockets. Now, companies will be wary about lending money to sister companies from which they ultimately plan to vanish.
The above four legs on which Indian capitalism was built is being dealt a body blow – both by recent court action (cancellation of 2G and coal allocations, etc) and the RBI’s own new rules of willful default.
Indian capitalists will henceforth have to stick to the straight-and-narrow. And yes, they will have to bring more of their own money to start a legitimate business. The free lunch is over.

Lenders to take Charege of Assets Sale at Lanco Infratech

Lenders to take charge of asset sale at cash-strapped Lanco Infratech
























Arun Kumar, ET Bureau | 9 Sep, 2014, 06.51AM 


India's top lenders, impatient with the delays in cash-strapped LancoInfratech's asset-disposal programme, are planning to take direct charge of the process to ensure they get what was owed to them, while providing fresh loans to get projects that have been stuck for various reasons moving again, according to an internal note. 

The banks, which have an exposure of Rs 49,000 crore to Lanco, will set up a three-member committee to run asset divestment. The company, which has been looking to raise money to pare debt, recently found a buyer for its Udupi power project but hasn't met with much success other than that. The lenders in turn will give fresh loans to complete projects that have got stuck. 

The bankers to Lanco, which has a market cap of less than Rs 2,000 crore, have decided that the "lead banker of project under construction may re-appraise the project within September 2014 and consider financing either 80:10:10 or convert part of the debt into equity upfront to ensure projects are completed and lenders can recoup their dues." 

This means that banks will give fresh loans to the extent of 80% of the project cost. In addition, 10% will be given in the form of sub-debt that can be converted into equity any time before the commercial operational date (COD). Hence the promoters need to chip in only 10% of the project cost as equity, said a banker, requesting anonymity. 

Trouble mounts for Vijay Mallya: Now SBI slaps wilful defaulter notice on KFA

Trouble mounts for Vijay Mallya: Now SBI slaps wilful defaulter notice on KFA
PTI  Sep 10,2014

Mumbai - Days after United Bank of India declared Kingfisher Airlines, promoter Vijay Mallya and three other directors wilful defaulters, the country's largest bank State Bank of India (SBI) today said it has also sent a notice to tag them as "wilful defaulters".
"We have already sent a notice to KFA (to declare it as wilful defaulter). There is a mandatory time that needs to be given to them to respond and that time is currently on," said Arundhati Bhattacharya, Chairperson of SBI.
SBI, which is the lead bank of a lender consortium to the crippled carrier, has an exposure of over Rs 1,600 crore.
The airline owes Rs 7,600 crore to 17 banks. In February 2012, the banks had formally declared loan recall on KFA and began recovery process.
So far, they have recovered around Rs 2,000 crore by selling pledged shares. They are now working on selling two other pledged properties - Kingfisher Villa in Goa and Kingfisher House in Mumbai.
Already, United Bank of India has won a legal backing on its decision to declare Mallya and other top executives of the airline as wilful defaulters. State-run PNB and IDBI Bank, and private lenders Federal Bank and Axis Bank are also in the process of doing the same.
PNB, which has around Rs 800 crore to recover from the airline, and wants to tag the company as a wilful defaulter, has approached a Division Bench of Delhi High Court to stay a single Judge order that has allowed Mallya to send his lawyers to present his case.
According to banking norms, a defaulting borrower has to be personally present in the bank that seeks to declare him /her as wilful defaulter and can't be represented through lawyers. Citing the same, the Calcutta High Court upheld United Bank's decision on Mallya.
Asked about why SBI, the consortium leader that has the largest exposure to the airline, has been silent on the issue, she said, "Whatever is required to be done is being done. The process is already on but we don't want to talk about any particular account in public as we would prefer working silently."
Meanwhile, debt-ridden Kingfisher Airlines yesterday contested UBI's decision to declare it as a wilful defaulter, saying that RBI guidelines in this regard do not apply to the company.
"Where they need to be stopped, we have done everything. If a regulator, whether Sebi or RBI, needs to know they all know everything," Bhattacharya told PTI in an interview here.
She said banks have to follow processes to defend themselves in case Kingfisher goes to court. "We have to be very sure ourselves that we can stand in a court of law in case he goes to court, and defend our action."
Calling for better recovery mechanism backed by law and not just by RBI norms, Bhattacharya said India needs a bankruptcy law.
"I personally believe we need much stronger laws for recovery and much better bankruptcy laws. The laws which we have at present are falling short of the requirement.
"The wilful defaulter tag is in RBI regulation but the force of law is not with it. So, you need a legal mandate there," Bhattacharya, who is completing her first year as the 208-year-old bank's first woman chief, said.
Asked why don't banks bunch all cases against KFA into a superior court, she said "It is being bundled as single case on behalf of the consortium. But declaring a borrower as a wilful defaulter can be done only by individual banks and not the consortium. This is legal requirement."
Kingfisher, which stopped flying since October 2012, owes as much as Rs 7,600 crore in principal and interest accrued since January 2012 to 17 banks. Among them, Punjab National Bank and IDBI Bank have Rs 800 crore exposure each.
Besides, Bank of India has Rs 650 crore lent to the airline, followed by Bank of Baroda Rs 550 crore, United Bank of India (Rs 430 crore), Central Bank of India (Rs 410 crore), Uco Bank (Rs 320 crore), Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).
According to RBI norms, a wilful defaulter is a person/company who deliberately doesn't honour debt commitments to lenders. Once branded a wilful defaulter, a person or entity cannot access institutional credit. Such a person cannot hold office of director.
PTI

Guarantors may get wilful defaulter tag too, says RBI




ET Bureau | 10 Sep, 2014, 05.03AM IST 

Companies and individuals who have furnished guarantees for wilful defaulters can also be accused as wilful defaulters, as per the new norms issued by the Reserve Bank of India (RBI). 

In a letter issued on Tuesday, RBI has said that if a guarantor refuses to pay lenders despite having sufficient means to pay the dues, banks could declare such a guarantor as a wilful defaulter. 

RBI has also said that bankers need not knock on the doors of guarantors after having exhausted all the remedies against the principal debtor. 

Recently, banks, led by United Bank of India, declared liquor baron Vijay Mallya'sKingfisher Airlinesas a wilful defaulter. 

However, this may not affect Mallya's affiliated companies as RBI has specified that these rules are from prospective effect. 

"When a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor/surety even without exhausting the remedies against the principal debtor," RBI said a notification. 

RBI also pointed out that where guarantees furnished by the companies within the group on behalf of the wilfully defaulting units are not honoured when invoked by banks or financial institution, such group companies should also be classified as wilful defaulters. 

However, it clarified that the new rules will apply only prospectively and not to cases where guarantees were taken prior to this circular. 

"Banks and FIs may ensure that this position is made known to all prospective guarantors at the time of accepting guarantees," it said. 

The norms have come in as the government, Sebi and the RBI are looking at taking measures to arm banks against wilful defaulters. 

Recently G S Sandhu, secretary financial services, said that the government will strengthen the law by allowing banks to change the management of wilful defaulters, while Sebi has barred those with a wilful defaulter tag to raise money from the capital market. RBI governor Raghuram Rajan has also said that 'wilful-defaulter tag is a powerful weapon in the hands of creditors for resolving distressed assets.' 

Data released by employee union, shows as of March 31, 2013-24, PSU banks had declared 406 companies with borrowings  Rs 70,300 cr as wilful defaulters.

Tuesday, September 9, 2014

State Bank of India too timid to act against Vijay Mallya, the 'defaulter'?

Vijay Mallya-promoted Kingfisher owes banks around Rs 7,000 crore and has been grounded since December 2012


It speaks volumes for the diffidence and timidity of banks that the State Bank of India (SBI) is yet to declare Vijay Mallya, chairman of the bankrupt Kingfisher Airlines, a wilful defaulter. Last week, a much smaller lender, the United Bank of India (UBI), declared Kingfisher and Vijay Mallya a wilful defaulter for not repaying Rs 400 crore after the Calcutta High Court dismissed an appeal by the company against the notice issued to it.
Kingfisher Airlines Ltd owes banks around Rs 7,000 crore and has been grounded since December 2012; even before that the company wasn’t servicing its loans and although the group’s other businesses were faring well, there was no attempt to pay off the loans.

If only India’s bankers had been more assertive with errant borrowers, their balance sheets might have been in a better shape today. A story of too many carrots, and very little stick, their willingness to take haircuts and write-downs—this goes back to the time when IDBI and ICICI Bank were financial institutions—has encouraged promoters to be lax about repayments, even behave with impunity. In Kingfisher’s case, the lenders needed to have accessed cash flows of United Breweries and United Spirits Ltd even as they restructured the airline’s debt; the worst move they made was to convert the dues into equity.
Source Name: Financial Express
September 9th, 2014