SC dismisses Mallya's plea on wilful defaulter tag

BS Reporter  |  Bangalore  

September 2, 2014 Last Updated at 23:30 IST

The move by SC not to intervene is another setback for Mallya, under threat of being ousted from three key boards of directors of his UB Group

The Supreme Court on Tuesday dismissed Kingfisher Airlines’ request to hear its plea against being tagged a “wilful defaulter” by Kolkata-based United Bank of India. The court said Kingfisher could, instead, appeal at the high court in Kolkata.

UBI on Monday declared Kingfisher chairman Vijay Mallyaand three other directors as wilful defaulters on non-payment of Rs 400 crore dues. The airline said this was done “post haste.”

This move by SC not to intervene is another setback for Mallya, under threat of being ousted from three key boards of directors of his UB Group — United Spirits, United Breweries and Mangalore Chemicals & Fertilisers.  The woes is expected to compound as a consortium of lenders is aggressively looking at selling various pledged assets of UB Group to recover unpaid dues, totalling Rs 4,000 crore.

“KFA and its Directors will vigorously challenge the decision of UBI and we strongly deny the allegations of wilful default for alleged non-payment of Rs 7.5 crore to UBI. KFA and its Directors have not been given any opportunity to present their case through lawyers of their choice before UBI, who have come to a wrongful ex parte decision in great haste, when the question of legal representation was under challenge,” stated Kingfisher.

Willful defaulters face ban on loans

TNN : TOI :20 Oct 2012

NEW DELHI: The government is asking banks and financial institutions to prevent willful defaulters from floating new ventures for at least six years by choking the flow of funds, especially long-term capital. 

Even auditors of these companies, who are seen to be negligent, could face action with the finance ministry suggesting that lenders lodge complaints with the Institute of Chartered Accountants of India (ICAI), the regulator for the profession. 

The suggestions come at a time when there has been spurt in bad debt of banks with gross NPAsas a percentage of loans rising to 3.5% at the end of June 2012 from 2.6% a year ago. During this period, private sector players, both new and old generation banks, had witnessed a decline in the proportion of gross NPAs. 

Within the public sector fraternity, which accounts for around 70% of the total banking business, Bank of Maharashtra and Dena Bank witnessed a decline in NPAs, but at least five lenders — Central Bank of India, State Bank of Mysore, State Bank of India, Union Bank of India and IDBI Bank — saw an increase of at least one percentage point. For SBI, gross NPAs accounted for over 5% of the loans given by it. Apart from action against willful defaulters, the government has also suggested better monitoring and more stringent recovery.

Willful defaulters face ban on loans

TNN | Aug 18, 2012, 12.59AM IST

 The government is asking banks and financial institutions to prevent willful defaulters from floating new ventures for at least six years by choking the flow of funds, especially long-term capital. 

Even auditors of these companies, who are seen to be negligent, could face action with the finance ministry suggesting that lenders lodge complaints with the Institute of Chartered Accountants of India (ICAI), the regulator for the profession. 

The suggestions come at a time when there has been spurt in bad debt of banks with gross NPAsas a percentage of loans rising to 3.5% at the end of June 2012 from 2.6% a year ago. During this period, private sector players, both new and old generation banks, had witnessed a decline in the proportion of gross NPAs. 

Within the public sector fraternity, which accounts for around 70% of the total banking business, Bank of Maharashtra and Dena Bank witnessed a decline in NPAs, but at least five lenders — Central Bank of India, State Bank of Mysore, State Bank of India, Union Bank of India and IDBI Bank — saw an increase of at least one percentage point. For SBI, gross NPAs accounted for over 5% of the loans given by it. Apart from action against willful defaulters, the government has also suggested better monitoring and more stringent recovery.

Corp Bank defaulters find their photos on hoardings

Source :Mayur Shetty, TNN | Apr 30, 2011, 05.40am IST

The Corporation Bank has decided to name and shame defaulters publicly to build pressure and make them repay loans. While some banks put out notices and advertisements naming defaulters in newspapers, the Mangalore-based bank has taken it a step ahead by putting up their photographs on hoardings.

"We put up the photographs of willful defaulters in our branches and on hoardings. 

We are not doing anything illegal because at the time of disbursement of loan, we obtain the photographs of borrowers and an authorization which allows us to take action if there is a default," said Ramnath Pradeep, chairman, Corporation Bank. 

According to Pradeep, publishing the photographs has helped improve loan recoveries. Reduction in bad loans through recovery and upgrade has improved to Rs 627 crore in 2010-11 from Rs 320 crore last year.

According to Pradeep, one woman who had a loan account in Delhi called him up and threatened to commit suicide if her photographs were not removed from a hoarding. "She did not commit suicide, but she did repay her loan," he said.

Bus this recourse is only possible when the borrower is an individual.

 The bank publishes the borrower's photographs ostensibly to announce to the general public that the bank is attaching his or her assets and people not to deal with him/her in any way. "We give them enough notice and enough opportunities to start repaying. It is only when we are set to take action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act that we publish photos," said H M A Khan, general manager, Corporation Bank.

In case of companies, since the borrower is a corporate entity it is not possible to publish individual photographs.

 However, the bank does send the names to a database of willful defaulters, which is published by the Credit Information Bureau of India.

Identifying willful defaulters is tricky business. 

Although RBI has come out with some guidelines, it broadly defines someone who is able to repay his loan but chooses not to. In terms of RBI's definition, it also includes those who have raised loans on false pretences or diverted funds.

Many years ago, officials of another south-based lender, Vijaya Bank, took to the streets to demonstrate outside the office of willful defaulters

 RBI has since strengthened the hands of lenders by helping to introduce new legislation that allowed them to attach the property of borrowers and sell them.