BY:

pramod kumar raju Ranjeet mhatre Ramniwas Dhammapal waghmare Vani soniya

willful default would be deemed to have occurred if any of the following event is noted: a)The Unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honor the said obligations. b)The Unit has defaulted in meeting its payment/repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.

c) The Unit has defaulted in meeting its payments / repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. D)The Unit has been defaulted in meeting its payment/repayment obligations to the lender and has also disposed off or removed the movable assets or immovable property given by him or it for the purpose of securing the facility/ies without the knowledge of the Bank/lender.

The terms Diversion of funds referred above, would be construed to include any one of the undernoted occurrences: a) Utilization of short term working capital funds for long term purposes not in conformity with the terms of sanction. b) Deploying borrowed funds for purposes / activities or creation of assets other than those for which the facility was sanctioned.

 c) Transferring funds to the subsidiaries / Group

concerns or other corporates by whatever modalities. d) Routing of funds through any Bank other than the lender bank or members of consortium without previous permission of the lender. e) Investment in other Companies by way of acquiring equities/debt instruments without approval of lenders. f) Shortfall in deployment of funds vis--vis the amounts disbursed / drawn and the difference not being accounted for. .

 The

decision as to whether a particular instance amount to siphoning of funds would have to be a judgment of the lender based on objective facts and circumstances of the case The identification of the willful default should be made keeping in view the rack record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as willful must be intentional, deliberate and calculated.

 In

order to prevent the access to the capital markets by the Willful defaulters, a copy of the list of willful defaulters ( Non-suit filed accounts) and list of Willful defaulters ( Suit filed accounts) are forwarded to SEBI by RBI and Credit Information Bureau (India ) Ltd.(CIBIL) respectively. Banks should not sanction any additional finance to the listed Willful defaulters. Such institutions should be debarred from institutional finance from the Scheduled Commercial Banks, Developmental Financial Institutions, Investment Institutions etc. for floating new ventures for a period of 5 years from the date the name of the Willful Defaulter is published in the list of Willful Defaulters by RBI.

The legal process wherever warranted against the borrowers / guarantors and foreclosure of recovery of dues should be initiated expeditiously. The Bank may also initiate criminal proceedings against Willful Defaulters, wherever necessary, with permission of the Competent Authority. A covenant in the loan agreements or an undertaking be obtained, with the companies in which the bank has significant stake, should be incorporated by the Bank to the effect that the borrowing Company should not induct a person who is a promoter or director on the Board of a Company which has been identified as a willful defaulter as per the definition given herein above and that in case, such a person is found to be on the Board of the borrower Company, it would take expeditious and effective steps for removal of the person from its Board.

In case where guarantees furnished by the Companies within the Group on behalf of the willfully defaulting Units are not honored when invoked by the Banks, such Group companies should also be reckoned as willful defaulters. Banks have to submit from the Corporate office, the particulars of borrowers including the PAN No., fathers/husbands name etc. in respect of : A) the list of suit filed accounts of willful defaulters of Rs.25.00 lacs and above as at the end of each quarter March, June, September and December every year to CIBIL and any other Credit Information Company which has obtained / would obtain certificate of Registration from RBI in terms of Sect.5 of the Credit Information Companies ( Regulation ) Act, 2005 and of which it is a member. B) Submit the quarterly list of Willful Defaulters where suits have not been filed only to RBI as per the prescribed format.

In accordance with RBI guidelines, BOB has put the following measures in place: a) Branches/ROs while identifying and recommending cases of Willful Defaulters, should well document the reasons satisfying the norms and supported by requisite evidence. The issue should normally be spelt out with reasons for which the borrower is being considered as willful Defaulter vis--vis RBI guidelines. b) With a view to imparting more objectivity in identifying cases of Willful Default, decisions to classify the borrower as Willful Defaulter, a Committee has been formed under the Chairmanship of Executive Director at BCC ( Baroda Corporate Centre ).

ED, GM (Rec.), GM (SME& Wealth Mgmt. ), GM ( Credit Monitoring), GM(Wholesale Banking), GM ( Rural & Agri. Banking). Chief Vigilance Officer- Special Invitee Dy. Gen. Manager - Special Invitee Dy. Gen. Manager (Recovery)- Convener of the Meeting. Minimum Quorum: Executive Director plus two General Managers.

Once

the name/s as willful Defaulters has been approved, the borrower should thereafter be suitably advised about the proposal to classify him as Willful Defaulter along with the reasons therefore. The concerned borrower should be provided reasonable time ( say 15 days) for making representation against such decision, if he so desires, to a Grievance Redressal Committee headed by the Chairman & Managing Director.

 CMD

will be the Chairman of the Grievance Redressal Committee and minimum two senior officials (as members) consisting of: -General Manager ( Recovery ) -Any other executive not below the rank of Dy. Gen. Manager of the Bank.

 The Grievance Redressal Committee shall give a

hearing to the borrower if he represents that he has been wrongly classified as willful defaulter. A final declaration as willful Defaulter will be made after a view is taken by the Committee on the representation and such name/s are to be notified to RBI / CIBIL by BCC and the borrower should be suitably advised. Depending upon the facts of the case even criminal action can be initiated under Sect. 403 and 415 of the Indian Penal Code. But Competent Authority has to take a decision in this regard.

RBI / CIBIL disseminate information on nonsuit filed suit filed accounts respectively as reported to them by the Banks. It is the responsibility of the Banks to report the information accurately. In addition to reporting the names of the current directors, it is necessary to furnish information about directors who were associated with the Company at the time the account was classified defaulter, to put the other Banks and financial institutions on guard. In the case of Govt. Undertakings, it should be ensured that the names of directors are not to be reported. Instead, a legend Government of ---Undertaking should be added.