Defining “Wilful Defaulters” –
In order to precisely define the term “Wilful Defaulters” and the related terms the Reserve Bank of India on 7th Jan’15 updated his guidelines and defined Wilful Defaulters as –
a. Any unit which has not made payment/ repayment obligations to its lender even though unit has an adequate capacity to fulfil the mentioned obligations will be a wilful defaulter.
b. The unit has not utilised the finance for already defined project or specific purpose and has diverted the funds.
c. If any unit have not utilised funds for specific purposes for which finance was availed to it and siphoned off the allocated funds, the unit will be a wilful defaulter.
d. Even after siphoning off the funds, if the unit does not …show more content…
II. Unit – Wherever unit term is mentioned in the Wilful Defaulter, it is construed for individuals, juristic persons, all forms of business enterprises. Interestingly, whenever any business enterprises, other than companies are defined as unit, then banks/lenders/FI’s can report the names of the responsible or authorized persons holding the enterprise management office for the enterprises affairs.
III. Funds diversion – Any unit will be a wilful defaulter if it diverse allocated funds :
i. If the short-term working capitals funds have been utilized for long term purposes, without the conformity of the sanction. ii. Deployed for purposes other than those for which the loan was sanctioned. iii. Transferred to the other subsidiaries or group companies by any modality. iv. Routed through any other bank other than lender bank without any prior permission from the lender.
v. Invested in the other company or companies by way of acquiring equities or debt instruments without any prior permission from the lender. vi. Not accounted for any shortfall in deployment vis-a-vis the amounts disbursed or withdrawn.
IV. Siphoning of funds - With wilful defaulters, siphoning of funds is interpreted as the utilization of funds unrelated to the sanctioned tasks of the borrower from the lenders or banks or financial institutions. These will
any other indebtedness or liability of the debtor to the secured party direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, including all future advances or loans which may be made at the option of the secured party.
The conveyance of a noncash financial asset to someone other than the issuer of that financial asset. The following include transfers: selling a receivable, putting a receivable into securitization trust, and receivable as collateral.
We are writing in response to our summons package that we received on June 20th 2017. As it states on page two of the summons yes we did enter into a contract with Nusenda for a new camper that at the time financially we thought we were able to commit to. But it became reality shortly after that it was going to be more difficult than we both anticipated. After being late with a payment here and there because of when payday would come around didn’t work with Nusenda and they were quick to load on the late fees and to push the calling daily and to mail out daily reminders to us till it all became too much. We were struggling to find the money to make some sort of payment to stop Nusenda from all their attempts to collect and still put food on our table for us and our four children.
Source of payments: The petitioners claim liquidity and the ability to pay interest or principal on amount owed, but conclusive findings show the insufficiency to pay interest or principal balance. This factor supports the treatment of the advances as equity.
b. Other indications of financial difficulties (default on loan or similar agreements, arrearages in dividends, denial of usual trade credit from suppliers, restructuring of debt, noncompliance with statutory capital requirements, the need to seek new sources or methods of financing, or the need to dispose of substantial assets).
As per these guidelines a willful default occurs when a borrower defaults in meeting its obligations to the lender when it has capacity to honor the obligations or when funds have been utilized for purposes other than those for which finance was granted. The list of willful defaulters is required to be submitted to SEBI and RBI to prevent their access to capital markets.