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

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.