- Yashovardhan Birla, the director of Birla Surya Ltd. and chairman of the Yash Birla Group, an industrial conglomerate, has been declared a willful defaulter by UCO Bank.
- Birla Surya Ltd. had availed of Rs 67 crore loans for the purpose of manufacturing multi-crystalline solar photovoltaic cells from Kolkata-based lender UCO Bank.
- This loan was classified as a non-performing asset (NPA) in 2013.
- The company and three other group firms of the conglomerate came under investigation for diversion of funds in 2018.
- There were also complaints against the company by fixed-deposit investors of not getting their money back.
- As a result, Yashovardhan Birla has been declared a willful defaulter by UCO Bank after Birla Surya Ltd failed to repay loans.
Who are Willful defaulters?
- The “willful default” would be deemed to have occurred if any of the following events is noted:
- The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honor the said obligations.
- The unit has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
- The unit has disposed of or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/lender.
Who declares willful defaulters and How?
- The evidence of willful default is examined by a committee
- Headed by an executive director of the lending agency
- Two other senior officers of the rank of general manager or deputy general manager.
- If the committee concludes that willful default has occurred, it issues a showcause notice to the borrower and calls for their submissions.
- After considering their submissions, the committee issues an order on willful default and the reasons.
- The order of the committee is then reviewed by another committee headed by-
- The chairman or managing director and
- Chief executive officer and
- Two independent directors.
- The order becomes final only after it is confirmed by this review committee.
Laws and provisions related to Willful defaulters in India
- Insolvency and Bankruptcy Code, 2016: It gives out a clear unified network framework for resolving Insolvency and Bankruptcy in India, wherein it adopts a creditor-in saddle approach.
- SEBI regulations: It disallows willful defaulters from boards and they are restricted from raising capital and involving in capital market activities.
- Banking Regulation Amendment Act, 2017: The RBI can issue directions to banks for resolution of stressed assets.
- The SARFAESI Act, 2002: The Actempowers the Bank to issue demand notice to the defaulting borrower and guarantor, calling upon them to discharge their dues in full within 60 days from the date of the notice.
- Companies Act, 2013: Section 447 (Punishment for the one who is guilty of fraud) and 448 (Punishment for false statements) are applicable with regard to willful defaulters.
- Indian Penal Code, 1860: A willful defaulter can be prosecuted under Section 415 and 403 of the IPC.
- Fugitive Economic Offenders Act, 2018: This has brought a comprehensive new framework to deal with problem of willful defaulters and the main objective of the act is to punish the ‘fugitive economic offenders’.
- Look out circulars: The government has now empowered bank chiefs to issue Look-out circulars to stop willful defaulters from leaving India.