Banks are looking to intensify the drive to name and shame corporate willful defaulters in the days to come. The development comes after the Supreme Court last month held that a person has no right to be represented by a lawyer in in-house proceedings initiated by banks or financial institutions to declare him willful defaulter for non-payment of dues.
Recently, Kolkata-based public sector lender UCO Bank published the name of Yashovardhan Birla along with his photograph, in newspapers, as a willful defaulter for failing to pay a debt of Rs 67.65 crore taken by Birla Surya Ltd. Yashovardhan Birla is the director of Birla Surya and also the chairman of the Yash Birla Group.
Earlier, banks had been reluctant to publically publish names of willful corporate defaulters due to apprehensions of legal cases that might follow on grounds of defamation. However, with the recent SC diktat, banks say that there is much clarity on the law.
Atul Kumar Goel, managing director and chief executive officer (MD & CEO) of UCO Bank told Business Standard that the bank is currently reviewing the names of more willful defaulters for publication. So far, it has published about 500 to 600 names, and another 200 names, including the names of corporate defaulters, would be published soon.
Ashok Kumar Pradhan, MD and CEO of United Bank of India said, about six to eight months back, the bank’s board decided not to go ahead with publication of names of willful defaulters. However, now, with the clarity in law, the bank will review the decision.
Mrutyunjay Mahapatra, MD and CEO, Syndicate Bank, said names of corporate defaulters would be published by the bank in the coming days.
The decision to declare someone as willful defaulter and publish his/her name in newspapers has to be taken at the apex level, given the sensitivity involved in the issue.
In September 2016, RBI said that some lending institutions were indiscriminately publishing photographs of defaulters/guarantors in newspapers. It said that a lending institution could consider publication of the photographs of only those borrowers, who had been declared wilful defaulters following the mechanism set out by the RBI in a master circular published on July 1, 2015. The circular talks about two committees being set by banks for declaring a person willful defaulter, with the second one, headed by chairman/MD of the bank, tasked to review the decision of the first committee in case of any dispute.
According to the recent SC ruling, after the first in-house committee finds that a borrower must be declared a wilful defaulter, the person must also be given an opportunity to make his representation within 15 days to the review committee. After this, the committee is expected to pass a “reasoned order” in the matter.
The court had said, "it cannot be possibly said that either in-house committee appointed under the Revised Circular dated 01.07.2015 is vested with the judicial power of the State.”
Earlier, in April, the Supreme Court had ruled that the Reserve Bank of India (RBI) was duty bound to disclose information related to wilful defaulters.