The private sector lender has initiated the process to categorise Goyal and his wife Anita as `wilful defaulters’. A ‘wilful defaulter’ tag by banks may stain the reputation of persons and restrict their ability to borrow and hold board positions in companies.
Yes Bank recently communicated this to the members of the promoter family of Jet Airways — India’s oldest private sector airline which stopped operations in 2019 after it ran out of cash.
Goyals, it’s believed, have responsed to Yes, indicating that they were not involved in the borrowings by the airline, sources told ET. Responding to a text message from ET, Yes Bank CEO Prashant Kumar said the bank does not comment on specific accounts.
The grounded airline owes more than Rs8500 crore to lenders. Yes, with exposure of Rs 550 crore to Jet, belongs to the consortium of lenders led by State Bank of India (SBI). In June 2019, the country’s bankruptcy court admitted an insolvency petition filed by SBI, paving the way for a resolution process for the troubled company.
“Categorising someone as ‘wilful defaulter’ is largely an administrative decision by banks and not a direct part of statute. However, it receives indirect statutory support as directions on wilful defaulter were issued under the Banking Regulation Act. It depends on whether a company despite having a surplus chose to use the money for some other purpose instead of repaying lenders..It may not always be a fair stand but that is the settled position in India. Besides other restrictions, a promoter or shareholder who is finally declared as wilful defaulter by banks cannot offer or participate in any resolution plan for the borrowing company,” said M.R.Umarji, former ED, Reserve bank of India. However, saddled with claims from operational creditors and employees, bankers have almost lost hope in revival of the company.
According to Ashish Pyasi, Associate Partner at the law firm Dhir and Dhir Associates, “The conduct of the borrower and the activities in the account are regularly monitored by the banks and if any event if wilful default has occurred then the evidence is placed before a committee for identification. If found there has been wilful default, show cause notice has to be issued. Pursuant to various RBI guidelines, this is a part of the process followed by the banks, particularly where the accounts have become NPA. If a bank notices activities falling with the definition of wilful default, it’s duty bound to follow the steps in the process,” said Ashish Pyasi Associate Partner Dhir and Dhir Associates
Including a promoter or borrower in the list of willful defaulters can be carried out only after a bank follows the due process. The persons in question are given the opportunity to respond to a lender’s notice, following which the matter is taken up by the independent directors of the bank. The borrower can also appeal to the Reserve Bank of India and move the court to restrain the bank.
Borrowers who have committed frauds or wilful default will remain ineligible for restructuring. But, in cases where the existing promoters are replaced by new promoters, and the borrower company is totally delinked from such erstwhile promoters or management, RBI rules allow lenders to “take a view on restructuring such accounts based on their viability, without prejudice to the continuance of criminal action against the erstwhile promoters/management.”
Last year, the Goyals were questioned by the Enforcement Directorate while probing allegations of diversion of funds received by Jet Airways as loans. In March 2019, Jet had announced that the Goyals would step down from the board of the company and Naresh Goyal would cease to be its chairman.